Y§;iR 

iill 


WILLIAMS  y  ROGERS   SERIES 

A  SHORT  COURSE  IN 
COMMERCIAL  LAW 


BY 

FREDERICK  G.  NICHOLS 

DIRECTOR    BUSINESS    EDUCATION 

DEPARTMENT    OF    PUBLIC    INSTRUCTION 

ROCHESTER,    N.Y. 

AND 

RALPH. E.   ROGERS 

OF    THE    NEW   YORK    BAR 


AMERICAN   BOOK  COMPANY 

NEW  YORK  CINCINNATI  CHICAGO 


COPYRIGHT,  1913,  BY 

FREDERICK  G.   NICHOLS  AND 

RALPH   E.   ROGERS 


W    P.  I 


PREFACE 

THERE  is  an  insistent  demand  for  a  commercial 
law  text  that  can  be  covered  thoroughly  and  com- 
pletely in  a  comparatively  short  time,  and  this  book 
has  been  prepared  to  meet  these  conditions. 

The  authors  have  included  in  the  text  all  the 
essential  topics,  and  have  kept  the  book  within  the 
prescribed  limits  by  excluding  topics  that  are  not 
of  sufficient  importance  to  be  a  part  of  every  com- 
mercial course.  The  language  used  in  the  text  is 
neither  legal  nor  technical,  so  that  teachers,  even 
without  special  legal  training,  will  find  the  subjects 
easy  to  teach  and  unusually  interesting  to  the  student. 

The  actual  cases  presented  in  connection  with  the 
legal  principles  treated  in  the  text  were  selected  with 
great  care  from  court  records,  and  their  study  in  con- 
nection with  the  study  of  the  legal  principles  on 
which  the  decisions  were  based  cannot  fail  to  add 
greatly  to  the  interest  in,  and  value  of,  the  subject. 

The  lesson  plan  is  a  feature  which  it  is  believed 
will  be  appreciated. 


298951 


CONTENTS 

PAGE 

LAW  IN  GENERAL i 

CONTRACTS       5 

PARTIES 8 

SUBJECT  MATTER 12 

MUTUAL  ASSENT -15 

CONSIDERATION 23 

DISCHARGE       .        .         .        .        .        .         .        .28 

PROPERTY 63 

CONTRACTS  FOR  THE  SALE  OF  PERSONAL  PROPERTY  70 

REAL  PROPERTY  CONTRACTS 100 

CONTRACTS     FOR    THE     BAILMENT    OF     PERSONAL 

PROPERTY 124 

INNKEEPERS 137 

COMMON  CARRIERS 142 

NEGOTIABLE  INSTRUMENTS 154 

BILLS  OF  EXCHANGE 164 

NEGOTIATION  AND  INDORSERS  .         .         .  .169 

FIRE  INSURANCE 189 

LIFE  INSURANCE 196 

GUARANTY  AND  SURETYSHIP     .                  .         .         .  216 

AGENCY    .* 233 

PARTNERSHIP 250 

CORPORATIONS 267 

PROCEDURE  AND  REMEDIES 287 

INDEX ^        ,        .        .295 

iv      i 

y 


A     SHORT     COURSE      IN 
COMMERCIAL      LAW 

LESSON  I 
LAW   IN   GENERAL 

1.  DEFINITION. 

2.  CLASSIFICATION. 

3.  COMMERCIAL  LAW. 

1.  Definition.  —  Law  has   been  defined  as  "a  rule 
of  action/'  on  the  theory  that  all  action  is  governed 
by  some  well-defined  law. 

2.  Classification. 

AS  TO  SCOPE 

Natural  Law  is  that  law  according  to  which  all 
nature  is  governed  and  has,  therefore,  a  wider  scope 
than  any  other  kind  of  law. 

Moral  Law  is  the  law  of  right  and  wrong  which 
should  govern  all  human  beings  in  their  intercourse 
with  each  other.  It  stands  next  to  natural  law  in 
scope,  since  it  is  world  wide  in  its  application. 

International  Law  is  that  law  accord  ng  to  which 
dealings  between  citizens  of  different  countries  are 
carried  on.  It  has  its  foundation  in  treaties,  cus- 


2  LAW  IN  GENERAL 

toms,  aricl' agreements  which  hive  been  entered  into 
from  time  to  time  between  nations  for  the  guidance 
of  their  citizens  in  their  intercourse  with  each  other. 
Municipal  Law  is  the  law  which  is  made  by,  and 
for,  the  benefit  of  any  unit  of  government.  The 
laws  of  cities,  counties,  states,  and  nations  belong 
to  this  class.  This  book  treats  of  one  branch  of  this 
law. 

AS    TO    SOURCE 

Constitutional  Law  is  that  law  which  has  its  origin 
in  formal  constitutions  adopted  by  the  people  of 
any  state  or  nation.  The  purpose  of  a  constitu- 
tion is  to  protect  the  rights  and  interests  of  the 
people  as  a  whole,  and  to  provide  a  broad  founda- 
tion upon  which  to  build  a  satisfactory  government. 
Only  the  broadest  rules  of  conduct  can  be  laid  down 
in  a  constitution. 

Common  Law  is  the  name  given  to  rules  of  action 
which  have  become  fixed  through  long  usage  by  the 
people  of  England  and  by  the  decisions  of  English 
courts.  In  early  times  when  men  first  began  to 
deal  with  each  other,  it  became  necessary  to  settle 
disputes  that  arose  between  individuals,  and  for 
this  purpose  a  small  body  of  men  were  often  called 
together  to  hear  the  facts  in  a  disputed  transaction. 
Upon  hearing  all  the  evidence  these  men  rendered 
a  decision.  When  other  disputes  of  a  similar  nature 
arose,  it  was  customary  to  settle  them  in  accordance 
with  the  decision  which  had  been  reached  in  the 
previous  case.  Soon  this  precedent  came  to  have 


LAW  IN  GENERAL  3 

the  effect  of  law.  At  first  these  decisions  were  not 
reduced  to  writing  and  therefore  had  no  permanent 
form.  Later,  when  courts  had  been  established  for 
the  trial  of  disputed  claims,  it  became  customary  to 
make  a  permanent  record  of  all  decisions,  together 
with  the  facts  upon  which  the  decisions*  were  based. 
Thus,  the  great  underlying  principles  upon  which  all 
laws  are  based  at  the  present  time,  are  embodied  in  a 
long  line  of  court  decisions. 

Statute  Law.  A  statute  law  is  a  law  made  by  any 
legislative  body.  Much  of  the  common  law  has 
been  reenacted  in  the  form  of  statutes.  When  the 
IJnited  States  became  an  independent  nation,  jj- 
was  determined  that  all  the  common  law  of  Englanc^. 
and  so  much  of  the  statute  law  of  England  as  was 
applicable  to  our  changed  conditions,  should  he  cojj- 
sicTered  the  Common  law**of  this  country  7  and  this 
law  is  still  in  force  except  where  changed  by  statute^ 
In  the  preparation  of  a  book  on  Commercial  Law- 
it  is  necessary  to  adhere  rather  strictly  tn  t\^f 
commorilaw.  __  Where  the  common  law  has  been 
changecTby  statute  in  any  state,  it  will  be  necessary 
for  students  in  that  state  to  consult  the  statutes. 

[  c  In  this  country  the  highest  law  under  which  W£. 
live"Ts  the  Constitution  of  the  United  States.^  Next 
to  this  in  authority  are  the  laws  enacted  by  Congress, 

\  The  Constitution  of  thf^tr  'n  w^1'^  wp  l'vp  rnmpg 
next  in  authority,  and  tne  statute  laws  enacted  byihs, 
legislature  of  the  state  stand  fourth^  Congress  has  the 

'Tight  to  legislate  only  regarding  interstate  matters. 


4  LAW   IN  GENERAL 

AS    TO   JURISDICTION 

Criminal  Law  is  that  part  of  the  law  which  has  to 
do  with  the  prevention  and  punishment  of  acts  which 
are  committed  against  the  welfare  of  society  as  a 
whole,  or  any  part  of  it.  When  a  person  steals  a 
watch,  this  act  of  stealing  is  one  that  would  en- 
danger the  property  of  the  entire  community  in 
which  the  property  was  stolen,  as  no  member  of  the 
community  could  be  sure  that  his  property  would 
not  be  taken  if  the  thief  were  allowed  to  go  un- 
punished. 

Civil  Law  is  that  part  of  the  law^adiictLhas  to  do 
with    the    relations    between    individuals.     Whena 
person  enters  into  a  contract  with  another,  and  thjea- 
refuses  to  carry  out  the  terms  of  his  agreerjQ£ft*-rt]ire» 
onjy  person  who  is  injured  is  theone  with  who™  thf 
contract  was  made.     The^cTvil  Hrw  is  invoked  against 
the  one  who  has  failed   to  carry  out  the  terms  of 
his  contract. 

3.  Commercial  Law.  —  Commercial  law  is  th^t 
part  of  the  civil  law  which  has  to  do  with  the  re- 
lations of  persons  in  business.  In  treating  this  sub- 
ject, it  has  seemed  best  to  consider  contracts  in 
general  first,  and  then  to  deal  with  the  special  con- 
tracts of  personal  property,  real  property,  negotiable 
instruments,  bailments, .common  carriers,  innkeepers, 
insurance,  guaranty  and  suretyship,  agency,  partner- 
ship, and  corporations. 

It  will   be  noticed   that  the  subject  of  contracts 


CONTRACTS  5 

runs  through  the  entire  book,  and  in  treating  the 
various  subjects  named,  the  contractual  side  is 
emphasized. 

The  chief  purpose  of  commercial  law  is  to  familiar- 
ize students  with  the  fundamental  principles  of  law, 
in  order  that  they  may  know  their  rights,  and  also 
that  they  may  avoid  making  mistakes  in  their  busi- 
ness dealings  which  would  involve  them  in  legal 
difficulties.  While  a  person  may  safely  handle 
legal  matters  of  minor  importance,  it  is  not  intended 
that  those  who  complete  the  study  of  this  text 
shall  become  their  own  lawyers,  but  rather  that 
they  shall  know  when  the  services  of  a  lawyer  are 
required,  and  to  the  utmost  degree  conduct  their 
business  in  such  a  way  as  to  eliminate  the  necessity 
for  the  employment  of  legal  service. 


LESSON   II 

CONTRACTS 

4.  DEFINITION. 

5.  ELEMENTS. 

6.  CLASSIFICATION. 

4.    Definition.  —  A  contract  is  an  enforceable  agree^. 
ment  between  two  or  more  competent  persons^  based, 
upon  consideration  or  in  writing  under  seal,  resulting^. 
injegal_obligation  to  do  or  not  to  do  some  particular 
tiling. 


CONTRACTS 


5.  Elements.  —  From  the  definition  it  will  be  seen 
that  there  are  four  essential  elements  of  a  contract : 

.)    Two  or  more  competent  persons. 

Legal  subject  matter  about  which  to  contract. 

utual  assent  to  the  terms  of  the  contract. 
Legal  consideration  or  the  formality  of  a  seal. 

These    elements    will    be    studied    separately    after 
contracts  have  been  properly  classified. 

6.  Classification.  —  Contracts  are  divided  as  to  form 
into  express  and   implied  contracts.     Contracts   are 


also    divided    as    to    fulfillment    into    executed    and 
executory  contracts. 

An  express  contract  is  one  in  which  the  intentions 
of  the  parties  and  the  terms  and  conditions  of  the 
agreement  are  settled  and  expressed  when  the  con- 
tract is  made.  It  is  complete  in  itself.  An  express 
contract  may  be  either  formal  or  simple  (parol). 

An^  implied  contract  is  one  in  which  the  parties  do 
not  n\ake  an  agreement  in  words,  but  by  their  acts 
show  anintention  to  contract,  and  from  these  acts  an. 
agreement  in  tact  "is  implied  and  mutual  obligations 
arise.  For  example,  a  ouiider  went  to  a  lumber 
merchant  and  said,  "  Send  twenty  bunches  of 
shingles  of  A  No.  i  grade  to  187  South  Ave."  The 
merchant  replied,  "  All  right,  they  will  be  delivered 
to-day."  The  contract  of  sale  is  expressed,  but  the 
contract  to  pay  the  market  price  is  implied.  When 
a  person  steps  on  the  street  car,  he  enters  into  an 
implied  contract  with  the  railway  company  in  which 


T 

yvo- 

CONTRACTS  7 

it  agrees  by  implication  to  carry  him  to  his  destina- 
tion if  such  destination  is  on  its  line,  either  direct  or 
by  transfer,  and  to  use  due  diligence  and  care  to 
carry  him  safely,  and  he  impliedly  agrees  to  pay  the 
regular  fare  for  the  service.  This  contract  is  implied 
from  actions  without  spoken  words^ 

There  is  another  form  of  implied  contracts,  called 
constructive  or  quasi  contracts.  These  are  not  true 
contracts,  since  there  Ts*no  agr^rnent  Kpi-wfr"  th^ 
p^rti^c  pniM-K^  ]nw  impli^s  a  contract  relation  on_ 
accountof  the  simplicity  of  the  remedy  and  because 
reason  and  justice  require  that  some  obligation 
should  exisE  For  example,  if  A,  to  save  himself 
from  loss,  should  pay  a  debt  which  B  should  have 
paid,  A  may  bring  action  against  B  just  as  though 
B  had  made  a  contract  to  pay  A  that  sum  of  money. 
Clearly  there  is  no  sort  of  agreement  between  A 
and  B,  but  the  law  implies  an  agreement  in  order 
that  A  may  receive  what  is  justly  due  him. 

Since  a  contract  is  essentially  an  agreement  be- 
tween the  parties,  it  need  be  in  no  particular  form, 
and  may  be  written  or  oral. 

A  formal  contract  is  a  written  contract  under 
the  seals  of  the  parties,  and  is  called  a  contract  hp 
specialty.  Of  this  sort  are  bonds,  deeds,  mortgages, 

«c.  •^f^^^t^-^ 

All  contracts  other  than;  specialty  contracts/  are 
called    simple   or    parnl   rr>nfr?g*s      These    may    be_ 
either  oral  or  written  and  no  special  form  of  wnH?  is 
necessary.     At   Common  Law  the  only  simple  con- 


8  .  CONTRACTS 

tracts  required  to  be  in  writing  were  those  in  the 
form  of  negotiable  instruments,  but  various  statutes 
have  added  to  this  requirement. 

An  executed  contract  is  one  the  terms  of  which  have 
been  carried  out.     Npjjiing  remains  to  be  done  by 
to  the  contract. 


An  executory  contract  is  one  for  the  fulfillment  of 
which  something  relrmjns  fo  be  done.  A  contract 
maybe  executed_as  JIQ  one  party  and  executory  as 
to  the  other.  For  example,  A  sells  and  delivers  his 
"norse  to  B,  who  promises  to  pay  A  $150  at  a  certain 
future  time  as  full  payment  for  the  horse.  The  con- 
tract is  executed  as  to  A,  and  executory  as  to  B. 


LESSON  III 
PARTIES 

7.  IN  GENERAL. 

8.  INFANTS. 

9.  PERSONS  MENTALLY  INCOMPETENT. 

10.  MARRIED  WOMEN. 

11.  ALIEN  ENEMIES. 

7.  In  General.  —  Since  every  contract  is  an  agree- 
ment, there  must  always  be  at  least  two  persons  con- 
cerned. In  general,  any  person  may  make  a  contract 
upon  any  terms  he  pleases.  There  are  certain  classes 
of  persons,  however,  who  are  unable  to  enter  into 
contracts  that  will  bind  them,  with  a  few  exceptions. 


PARTIES  9 

These  are  infants,  persons  mentally  incompetent, 
married  women,  and  alien  enemies. 

8.  Infants.  —  At  common  law  every  person  under 
the  age  of  twenty-one  years  is  an  infant.  In  some 
states  the  age  of  majority  has  been  changed  by 
statute.  The  law  considers  that  an  infant  is  unable 
properly  to  preserve  his  property,  and  for  his  pro- 
tection has  decreed  that  he  cannot  make  a  contract 
that  will  be  binding  on  him  except  in  certain  cases. 
This  does  not  mean  that  an  infant's  contract  is 
absolutely  void,  it  is  merely  voidable.  When  he 
becomes  of  age,  or  before,  he  may  repudiate  the  con- 
tract. He  may  ratify  it  when  he  becomes  of  age,  and 
if  ratified  it  becomes  a  valid  contract  in  all  respects. 

The  privilege  of  disaffirming  a  contract  on  the 
ground  of  infancy  is  a  personal  one  of  which  none 
except  the  infant  can  take  advantage.  Neither  a 
parent  nor  a  creditor  carr  disaffirm  an  infant's 
contract.  Nor  can  the  adult  with  whom  the  infant 
contracts  disaffirm  or  repudiate  the  contract. 

There  are  two  exceptions  to  this  general  rule  re- 
garding the  ability  of  an  infant  to  contract,  j^irs^t, 
he  can  always  bind  himself  to  pay  for  the  necessa- 
ries of  life,  such  as  clothing,  lodging,  education,  etc., 
provided  he  contracts  for  such  things  as  are  suited 
to  his  station  in  life,  and  which  have  not  already  been 
furnished  him.  An  adult  dealing  with  an  infant 
must  ascertain  whether  or  not  things  purchased  by 
him  are  necessaries.  Even  in  the  case  of  necessaries, 
the  law  will  protect  the  infant  who  has  agreed  to  pay 


io  CONTRACTS 

an  excessive  price.  His  contract  will  be  set  aside 
and  the  seller  will  be  permitted  to  recover  a  reason- 
able price. 

An  infant  may  repudiate  his  contract,  even  though 
he  is  not  in  a  position  to  restore  the  other  party  to 
his  original  position  as  regards  the  thing  contracted 
about,  but,  if  possible,  he  must  restore  anything  re- 
ceived under  the  contract.  For  example,  an  adult 
who  sells  a  horse  to  an  infant  will  be  obliged  to  re- 
turn the  purchase  price  upon  the  request  of  the  in- 
fant, even  though  the  horse  has  died  since  the  con- 
tract was  made. 

It  is  generally  held  that  a  contract  by  which  an 
infant  secures  the  services  of  another  as  his  agent  is 
void,  not  merely  voidable,  particularly  where  the 
agency  relation  is  created  by  a  power  of  attorney 
under  seal. 

9.  Persons  Mentally  Incompetent.  —  Since  a  meet- 
ing of  the  minds  of  the  parties  is  necessary  to 
create  a  valid  contract,  a  person  who  is  mentally  in- 
competent cannot  make  a  valid  contract  except  for 
necessaries.  Accordingly,  a  person  may  avoid  a 
contract  by  showing  that  he  was  insane  or  intoxicated 
when  the  contract  was  ma'de,  and  that  his  condition 
was  apparent,  or  otherwise  known  to  the  other  party. 
Such  a  contract  is  voidable,  not  void,  and  may  be 
ratified  when  the  person  is  restored  to  a  rational 
mental  condition.  A  person  may  be  judicially  de- 
clared incompetent  on  account  of  idiocy,  insanity,  or 
habitual  drunkenness,  and  a  guardian  will  be  ap- 


PARTIES  1 1 

pointed  to  manage  his  property.  Thereafter  the 
incompetent  can  make  no  valid  contracts,  as  his 
guardian  has  full  charge  of  his  affairs. 

If  a  person  innocently  makes  a  contract  with  one 
who  is  insane  at  times  and  rational  at  other  times, 
he  may  enforce  the  contract  if  it  be  one  of  a  kind  the 
repudiation  of  which  would  cause  a  loss  to  him.  This 
would  not  be  true,  however,  if  the  insane  party  had 
been  declared  insane  judicially.  It  would  come 
under  the  general  rule  that  where  one  of  two  innocent 
persons  must  suffer  a  loss,  the  one  who  made  the  loss 
possible  is  the  one  who  should  stand  it. 

10.  Married  Women.  —  Under  the  common  law, 
when   a  woman   married   her   property   rights  were 
merged  in  those  of  her  husband.     She  lost  her  iden- 
tity as  far  as  the  contracting  privilege  was  concerned. 
This  common  law  disability  has  been  quite  largely 
removed,  and  in  many  states  a  married  woman  may 
contract  as  freely  concerning  her  individual  property 
as  she  could  have  done  when  single. 

11.  Alien  Enemies.  —  When  a  country  is  engaged 
in  war  it  is  important  that  its  citizens  should  have 
no  dealings  with  the  hostile  country.     It  is  assumed 
that  while  they  are  at  war  their  interests   are  ad- 
verse,  and  to  permit  dealing  of  any  kind   at    that 
time  would   open   a  way  for   unscrupulous   citizens 
to    make    private    profit    out    of   harmful  business, 
such  as  furnishing  arms  or  other  munitions  of  war. 
Considerations    of   public   policy    demand    the   sus- 


T2  CONTRACTS 

pension  of  all   contracts    between   alien   enemies   in 
time  of  war. 

LESSON   IV 

SUBJECT  MATTER 

12.  IN  GENERAL. 

13.  ACTS  AGAINST  PUBLIC  POLICY. 

14.  IMMORAL  ACTS. 

15.  FRAUDULENT  ACTS. 

12.  In  General.  —  We  have  discussed  the  first 
element  of  a  contract  and  now  turn  our  attention 
to  the  second  element,  namely,  subject  matter.  The 
subject  matter  of  a  contract  is  the  thing  about  which 
the  agreement  is  made.  The  only  requirement  is 
that  the  subject  matter  shall  be  lawful.  Anything 
which  is  in  itself  unlawful  cannot  be  the  subject  of  a 
legal  contract  the  fulfillment  of  which  would  require 
the  performance  of  an  unlawful  act.  Among  the 
acts  that  are  considered  unlawful  are, 

ACTS    AGAINST    PUBLIC    POLICY 

(a)    Unreasonable  restraint  of  marriage. 

(/•>)    Unreasonable  restraint  of  trade. 

(r)   Subversion  of  governmental  functions. 

IMMORAL   ACTS 

(a)  Bets  or  wagers. 

(b)  Acts  in  desecration  of  the  Sabbath. 

(c)  Criminal  acts. 


SUBJECT  MATTER  13 

FRAUDULENT    ACTS 

The  law  will  aid  neither  party  to  contracts  under 
any  of  the  above  heads,  since  both  are  equally  guilty 
of  wrong  doing  in  entering  into  the  contract.  This 
is  true  even  though  refusal  to  recognize  the  contract 
relation  would  enable  one  or  more  of  the  parties  to 
gain  an  advantage  over  the  other. 

13.  Acts  against  Public  Policy.  —  (a)  Contracts 
in  restraint  of  marriage  are  lawful  if  they  are  reason- 
able in  view  of  all  the  circumstances.  If,  for  ex- 
ample, a  father  enters  into  a  contract  with  his  son, 
providing  for  the  payment  of  a  specified  sum  of  money 
on  condition  that  the  son  will  refrain  from  marrying 
until  he  is  twenty-five  years  of  age,  such  a  contract 
is  reasonable  and  would  be  upheld  by  the  courts. 
If,  however,  the  contract  had  provided  that  the  son 
remain  single  during  his  lifetime,  it  would  be  con- 
sidered an  unreasonable  restraint  of  marriage  con- 
trary to  public  policy,  and  the  law  would  not  recog- 
nize it  as  a  valid  contract. 

(b)  The  same  general  principle  applies  to  contracts 
in  restraint  of  trade.  If  a  retail  meat  dealer  should 
sell  his  market  and  agree  not  to  enter  into  the  same 
kind  of  business  in  the  United  States,  such  a  contract 
would  not  be  upheld  by  the  law  as  it  would  be  con- 
sidered an  unreasonable  restraint  of  trade.  If, 
however,  the  agreement  provided  that  the  seller 
should  not  engage  in  the  same  business  in  a  locality 
where  he  would  draw  any  of  his  old  trade,  the  con- 


14  CONTRACTS 

tract  would  be  lawful  and  could  be  enforced.  Only 
such  contracts  in  restraint  of  trade  can  be  made  as 
will  protect  the  interests  of  the  contracting  parties. 
(c)  A  contract,  the  purpose  of  which  is  to  interfere 
with  the  natural  course  of  justice,  is  one  subversive 
of  a  governmental  junction.  For  example,  A  agrees 
to  pay  B  $100  if  he  will  testify  falsely  regarding  a 
case  in  which  he  has  been  called  as  a  witness.  Such 
an  agreement  would  be  void.  Likewise,  a  contract 
for  the  sale  of  a  public  office  or  any  emolument 
thereof  would  be  classed  under  this  head. 

14.  Immoral  Acts. —  (a)  In  the  case  of  bets  or 
wagers  a  court  of  law  will  not  recognize  such  con- 
tracts as  existing.  The  winner  cannot  successfully 
invoke  the  law  to  aid  him  in  collecting  the  amount 
won  nor  can  the  loser  call  upon  a  court  to  assist 
him  in  recovering  what  he  has  paid  as  a  result  of  a 
wager.  In  the  case  of  wagering,  where  the  money 
has  been  placed  in  the  hands  of  a  third  party,  a 
court  of  law  will  aid  either  party  in  recovering  from 
the  stakeholder  the  amount  placed  in  his  hands  by 
that  party.  If  the  stakeholder  refuses  to  pay  it  over 
upon  the  demand  of  the  party  that  placed  it  in  his 
hands,  he  is  personally  liable  for  the  amount  so  re- 
fused. The  law  will  interfere  to  this  extent,  not  to 
undo  an  illegal  contract,  but  to  prevent  the  consum- 
mation of  one. 

In  the  majority  of  states  it  has  been  held  that 
contracts  made  in  the  regular  course  of  business  on 
Sunday  may  be  enforced.  If,  however,  the  business 


MUTUAL  ASSENT  15 

transacted  in  any  way  interferes  with  the  observance 
of  the  Sabbath  by  any  individual  or  class  of  individ- 
uals, such  contracts  will  be  void. 

Any  contract  which,  if  carried  out,  would  cause 
one  or  both  parties  to  commit  a  crime  is  void. 

15.  Fraudulent  Acts. — Any  contract,  the  object  of 
which  is  to  defraud  one  or  more  of  the  parties  in- 
terested, the  general  public,  or  other  persons,  is  void 
as  an  immoral  act. 


LESSON   V 
MUTUAL  ASSENT 

16.  MUTUAL  AGREEMENT. 

17.  OFFER  AND  ACCEPTANCE. 

16.  Mutual  Agreement. -- We  now  come  to  the 
discussion  of  the  third  element  of  a  contract,  agree- 
ment or  mutual  assent.     The  consent  of  the  parties 
to  the  terms  of  the  contract  understood  alike  by  all 
the  parties  concerned,  must  be  complete  and  definite. 
Any  agreement  that  is  obtained  by  fraud  or  com- 
pulsion is  invalid,  since  there  has  been  no  real  con- 
sent by  the  party  defrauded  or  coerced.     A  mutual 
agreement  consists  of  an  offer  and  an  acceptance. 

17.  Offer  and  Acceptance. -- The  offer  must   be 
definite   and   must   be   made  with  the  intention   of 
creating   a   legal  obligation.     One   made  in  jest   or 


1 6  CONTRACTS 

anger  and  so  understood  by  the  offeree  cannot  be 
made  the  basis  of  a  contract. 

An  offerer  may  make  any  terms  he  pleases  in  his 
offer  as  to  the  time,  place,  manner,  or  condition  of  its 
acceptance,  and  may  insist  on  an  exact  compliance 
with  them.  This  is  true,  however  unusual  or  un- 
necessary the  terms  may  be,  as  there  would  be  no 
meeting  of  minds  if  the  acceptance  differed  in  any 
respect  from  the  offer.  A  conditional  or  qualified 
acceptance  is  the  same  as  a  rejection  of  the  offer,  and 
is  in  reality  the  substitution  of  a  new  offer  which  can 
be  in  turn  accepted  or  rejected  by  the  original  offerer. 

An  offer  should  be  accepted  in  the  exact  manner  in 
which  it  is  offered  unless  some  other  method  is  in- 
dicated by  the  offerer. 

To  be  effective,  the  offer  must  be  communicated 
to  the  offeree  with  the  knowledge  and  consent  of  the 
offerer.  If  A  renders  services  for  B  without  B's 
knowledge,  B  is  not  bound  to  pay  for  them  as  there 
is  no  contract.  Also,  if  A  captures  a  criminal  with- 
out knowing  that  a  reward  has  been  offered  for  such 
ervices,  he  cannot  claim  the  reward. 

An  offer  does  not  remain  open  indefinitely.  If  the 
offer  is  made  orally,  it  is  understood  to  be  withdrawn 
when  the  parties  separate.  If  it  is  made  by  telegram 
or  by  letter,  it  is  withdrawn  when  a  sufficient  or 
reasonable  time  has  elapsed  in  which  the  offeree 
might  have  accepted  it,  usually  the  day  of  its  re- 
ceipt. The  offer  lapses  upon  its  refusal  by  the 
offeree  or  on  the  death  or  insanity  of  either  party. 


MUTUAL  ASSENT  17 

When  it  has  once  been  allowed  to  lapse  it  cannot 
be  revived,  but  a  new  offer  may  be  made  in  its 
place/  \An  offer  may  be  revoked  by  giving  notice 
any  time  before  acceptance.^ 

Only  the  one  to  whom  the  offer  is  made  can  accept' 
it  unless  the  offer  is  a  public  one,  when  any  one  toy 
whose   attention   it   is   brought   may   accept.      If  A 
offers  to  pay  B  for  all  the  ice  B  delivers  to  him,  and  C 
buys  B's  business  and  continues  to  deliver  ice  to  A 
who  does  not  know  of  the  change,  A  is  not  bound  to 
pay  C  for  the  ice  delivered  by  him,  since  there  was  no 
contract  between  A  and  C.     A's  offer  was  to  B  and 
C  could  not  accept  it. 

An  offer  may  require  for  its  acceptance  either  an 
act  or  a  promise.  A  contract  made  up  of  an  offer  ac- 
cepted by  an  act  is  called  a  unilateral  contract,  as  only 
one  party  is  bound.  Thus,  if  A  offers  to  pay  B  ten 
dollars  if  he  will  walk  five  miles  in  an  hour,  B  is  not 
bound  to  perform  the  act,  but  if  he  does,  A  is  bound 
to  pay  the  money.  The  doing  of  the  act  is  itself  an 
acceptance  of  the  offer  and  need  not  be  communi- 
cated to  the  offerer. 

An  offer  accepted  by  a  promise  creates  a  bilateral 
contract  since  both  parties  are  bound.  Thus,  if  A 
offers  to  sell  B  one  hundred  horses  if  B  will  agree  to 
pay^  fifty  dollars  each  for  them,  and  B  so  agrees, 
both  A  and  B  are  bound  to  perform  their  respective 
agreements.  The  acceptance  of  the  offer  is  the 
promise  to  pay,  and  such  an  acceptance  must  be 
communicated  to  the  offerer  to  be  effective. 
I 


1 8  CONTRACTS 

The  acceptance  of  an  offer  received  by  mail  is 
deemed  to  be  communicated  when'it  is  placed  in  the 
mail  box,  or,  in  other  words,  when  it  has  gone  beyond 
the  control  of  the;acceptor.  This  is  true  even  though 
the  one  to  whom  the  acceptance  is  mailed  never  re- 
ceives it.  To  hold  the  offerer  to  his  contract,  it  is 
only  necessary  to  prove  that  the  acceptance  was 
mailed  within  a  reasonable  time  from  the  date  of 
receipt  of  the  offer.  Custom  sanctions  the  use  of 
xthe  mails  in  fche  transaction  of  business,  and  in  many 
cases  this  is  the  only  method  that  could  be  employed 
to  advantage.  Since  this  is  the  case,  the  offeree  has 
done  all  that  could  be  expected  of  him  when  he  mails 
his  acceptance,  and  it  is  only  fair  to  consider  that 
the  contract  dates  from  the  time  of  such  mailing. 


LESSON  VI 

./ 

MUTUAL  ASSENT  —  CONTINUED 

1 8.  REALITY  OF  CONSENT. 

19.  MISTAKE. 

20.  FRAUD. 

21.  FIDUCIARY  RELATIONS. 

18.  Reality  of  Consent.  —  When  two  parties  give 
their  mutual  assent  to  the  terms  of  a  contract,  it  is 
understood  that  there  has  been  an  absolute  meeting 
of  minds,  and  that  both  parties  understood  the  terms 
of  the  contract  alike.  It  sometimes  happens  that 


MUTUAL  ASSENT  ri        19 

either  mistake  or  fraud  enters  into  the  negotiations, 
and,  as  we  shall  see,  this  sometimes  vitiates  the 
agreement. 

19.  Mistake.  --  When  the_ mistake  regarding  the 
contract  is  mutual,  except  where  the  mistake  is  as 
to  the  quality  of  the  thing  contracted  about,  the 
conj-ract  is  void.  No  obligation  could  arise  where 
there  was  no  meeting  of  minds  due  to  a  misappre- 
hension on  the  part  of  both  contracting  parties. 

In  some  cases  the  mistake  is  made  by  only  one 
partjTto  the  contract,  and  is  called  a  unilateral  mis^" 
TaTte*.,  The  mistake  may  be  as  to  the  existence  ot  the 
thing  contracted  about.  This  is  true  wjiere  the  sub- 
ject matter  of  the  contract  has  ceased  to  exist  with- 
out the  knowledge  of  either  party  at  the  time  the 
contract  is  entered  into.  Such  a  mistake  will  avoid 
the  contract. 

There  is  sometimes  a  mistake  on  the  part  of  one  or 
both  parties  as  to  the  identity  of  the  subject  matter 
contracted  about.  For  example,  A  owns  two  lots 
on  opposite  corners  of  two  streets  at  their  intersec- 
tion. One  of  them  is  for  sale,  the  other  is  not.  B 
learns  that  A  has  a  lot  for  sale,  but  is  not  aware  that 
A  owns  two  lots.  B  offers  A  two  hundred  dollars 
for  his  lot,  but  he  has  in  mind  the  one  that  is  not 
for  sale.  A,  thinking  B  means  the  lot  he  has  for 
sale,  accepts  the  offer.  When  the  mistake  as  to 
identity  of  the  lot  is  discovered,  the  contract  can  be 
set  aside.  No  obligation  can  result  from  such  a 
contract. 


20  CONTRACTS 

A  mistake  as  to  the  quality  ofthej-hing  dogs  not 
make  the  contract  void.^  A  ^Misrepresentation  re- 
garding  the  quality  would  render  the  party  making  it 
liable  in  damages  if  the  representation  was  in  the 
form  of  a  warranty. 

Caveat  emptor  applies  where  the  subject  matter  of 
the  contract  is  present  at  the  time  the  contract  is 
made.  It  is  a  Latin  expression  meaning,  "  Let  the 
buyer  beware."  When  the  buyer  having  an  oppor- 
tunity to  inspect  the  goods  he  is  purchasing,  does 
inspect  them,  and  relies  upon  his  own  judgment  re- 
garding their  character  or  quality,  he  cannot  avoid 
the  contract  or  hold  the  seller  responsible  in  damages 
for  any  loss  that  he  may  sustain.  This  makes  it 
necessary  for  one  who  is  not  competent  to  judge  of 
the  thing  he  is  buying  to  require  the  seller  to  give 
a  warranty  as  to  its  quality. 

If  a  mutual  mistake  is  made  regarding  the  legal 
effect  of  the  contract  where  neither  party  is  at  fault, 
the  contract  is  void  as  there  is  no  meeting  of  minds. 

Where  the  mistake  has  to  do  with  the  thing 
promised  by  either  party,  instead  of  as  to  the  sub- 
ject matter,  the  contract  will  be  void  if  the  party 
promising  knew  that  the  other  party  was  laboring 
under  a  misapprehension  as  to  the  thing  promised 
and  did  not  make  the  matter  plain  to  him.  When  a 
person  makes  a  promise,  he  is  bound  to  make  his 
intention  understood,  and  it  is  only  right  to  require 
him  to  correct  any  misapprehension  that  may  result 
either  from  the  stupidity  of  the  promisee  or  the  lack 


MUTUAL  ASSENT  21 

of  clearness  on  the  part  of  the  promisor,  when  that 
misapprehension  is  known  to  the  latter.  He  is, 
however,  under  no  obligation  to  correct  a  mistake 
on  the  part  of  the'promisee  as  to  the  quality  or  char- 
acter of  the  thing  under  consideration  when  that 
mistake  does  not  result  from  a  misunderstanding  of 
the  promise  made. 

20.  Fraud.  —  Fraud  is  a  misrepresentation  made 
intentionally  or  in  reckless  disregard  of  the  truth, 
with  intent  to  deceive  and  actually  deceiving  a 
second  party  who  relies  on  the  misrepresentation  to 
his  damage.  Where  fraud  enters  into  the  making  of 
a  contract,  the  contract  will  not  only  be  voidable, 
but  the  party  guilty  of  committing  fraud  is  liable  to 
a  criminal  action. 

Fraud  sometimes  takes  the  form  of  duress.  This 
occurs  when  a  party  is  forced  to  enter  into  a  contract 
by  a  threat  of  violence  to  his  person  or  property  or 
to  that  of  a  member  of  his  immediate  family.  Con- 
sent so  secured  is  of  no  validity. 

Artful  concealment  of  a  material  fact  not  discover- 
able amounts  to  fraud.  Mere  nondisclosure  of  a 
fact  does  not  constitute  fraud  unless  it  is  the  seller's 
legal  duty  to  disclose  it,  as  where  the  parties  stand  in 
a  confidential  or  fiduciary  relation  to  each  other. 

The  misrepresentation  must  be  of  a  fact  and  not 
merely  the  statement  of  intention  or  opinion.  Much 
latitude  is  allowed  for  dealer's  talk.  Mere  prediction 
as  to  probable  future  value  is  not  fraud.  Promoters 
and  others  interested  in  the  sale  of  stocks  and  other 


22  CONTRACTS 

securities  are  held  more  strictly  accountable  for  the 
truth  of  their  statements. 

21.  Fiduciary  Relations.  —  Fiduciary  relations 
exist  where  one  party  is  in  a  superior  position  and  is 
able  to  exert  unusual  influence  over  another.  For 
example,  a  father  has  ordinarily  a  greater  influence 
over  his  son  than  has  any  person  outside  the  family. 
A  lawyer  in  matters  pertaining  to  the  law  has  greater 
influence  with 'his  client  than  does  any  other  person. 
A  physician  sustains  a  peculiar  relation  to  his  pa- 
tient, and  a  guardian  is  in  a  position  to  exercise  un- 
usual influence  over  his  ward.  These  are  all  fiduciary 
relations,  and  all  contracts  made  between  parties  in 
such  relations  are  scrutinized  with  the  utmost  care 
when  they  are  brought  before  a  court  for  adjust- 
ment. They  are  not  necessarily  void,  but  are  con- 
sidered contracts  in  which  the  utmost  good  faith 
must  be  exercised  by  the  superior  toward  the  in- 
ferior. If  it  can  be  shown  that  undue  influence  was 
brought  to  bear  on  the  latter  whereby  he  was  in- 
duced to  enter  into  a  contract  to  his  disadvantage, 
the  contract  will  be  set  aside  as  lacking  one  of  the 
essential  elements  of  a  contract,  viz.,  meeting  of 
minds.  Contracts  between  persons  in  fiduciary  rela- 
tions come  under  the  head  of  uberrima  fides  contracts. 


CONSIDERATION  23 

LESSON  VII 
CONSIDERATION 

22.  DEFINITION. 

23.  PRESUMPTION  OF  CONSIDERATION. 

24.  GOOD  CONSIDERATION. 

25.  VALUABLE  CONSIDERATION. 

26.  CONSIDERATION  MAY  BE  AN  ACT  OR 

A  PROMISE. 

22.  Definition. -- The   fourth   element   of    a   con- 
tract is  consideration,  which  must  support  all  execu- 
tory parol  contracts.     Consideration  is  defined  as  a 
benefit  to  the  promisor  or  a  detriment  to  the  prom- 
isee.    It  is  important  that  consideration  should  not 
be  confused  with  motive.     A  manufacturer  may  sell 
goods  at  a  very  low  price  in  order  to  introduce  them 
to  the  public.     His  motive  is  the  desire  to  advertise 
his  goods,  but  the  consideration  of  the  contract  is 
the  price  to  be  paid. 

23.  Presumption  of  Consideration.  —  At  the  com- 
mon law,  a  seal  dispenses  with  the  necessity  for  con- 
sideration, and  it  is  generally  held  that  any  mark 
placed  after  the  signature,  and  intended  by  the  party 
signing  to  be  a  seal,  will  have  the  effect  of  sealing 
the  contract.     In  the  case  of  negotiable  contracts, 
as  notes  or  bills  of  exchange,  there  is  a  presumption  of 
consideration  which  is  conclusive  when  the  contract 
is  in  the  hands  of  a  bona  fide  holder.     This  presump- 


24  CONTRACTS 

tion  may  be  shown  to  be  incorrect  as  between  the 
original  parties  to  the  instrument.  In  a  few  states 
the  same  presumption  exists  by  statute  in  favor  of 
all  written  contracts. 

24.  Good  Consideration. -- There  is  a  distinction 
made    between    good    and    valuable    consideration. 
Ties  of  marriage,  blood  relationship,  or  natural  love 
and  affection  are  called  good  consideration,  but  are 
of  little  validity  as  they  are  void  as  against  creditors 
or  innocent  purchasers.     Thus,  if  A  deeds  land  to  B, 
his  son,  in  consideration  of  his  love  and  affection,  B 
may  hold  the  land  against  A,  but  if  A  had  merely 
promised  to  deed  it,  B  could  not  enforce  the  promise. 
Even  if  deeded,  he  could  not  hold  the  land  under  such 
a  deed  against  a  creditor  of  A  or  a  purchaser  in  good 
faith  from  A. 

25.  Valuable    Consideration.  —  A  valuable  consid- 
eration is  any  benefit  to  the  promisor  or  any  detri- 
ment to  the  promisee.     It  is  not  necessary  that  there 
be  both  a  benefit  to  one  and  a  detriment  to  the  other. 
If  the  promisee  does  something  he  is  not  bound  to  do, 
or  refrains  from  doing  something  he  has  a  right  to  do, 
either  will  be  considered  valuable  consideration  and 
will  support  a  contract.     It  is  not  necessary  that  the 
promisor  receive  any  benefit  from  the  act  of  the  prom- 
isee.    A  third  party  may  be  benefited  or  it  may  be 
that   nobody    receives    any   substantial   benefit.     A 
surrender   of   a    legal    right   is    a    detriment   to  the 
party  who  gives  up   such  a  right,  and  is  therefore 


CONSIDERATION  25 

valuable    consideration    upon    which    to    found    a 
contract. 

26.  Consideration  may  be  an  Act  or  a  Promise.  — 
The  consideration  of  a  contract  may  be  either  an 
act  or  a  promise.  A  promises  to  pay  B  $ibo  any 
time  he  is  ready  to  deliver  to  him  a  boat  made  accord- 
ing to  specifications  furnished  by  A.  B  may  decide 
to  accept  A's  offer,  but  there  is  no  contract  until 
B  has  built  the  boat  and  is  ready  to  deliver  it. 
But  as  soon  as  B  delivers  the  boat,  the  promise  of 
A  becomes  binding.  If  A  had  offered  B  $100  for 
the  boat  to  be  built  by  him  and  exacted  from  B  a 
promise  that  he  would  build  the  boat  in  accordance 
with  specifications  furnished,  and  B  accepts  the 
offer,  and  promises  to  build  the  boat,  mutual  promises 
are  made  and  each  promise  is  a  consideration  for 
the  other.  In  such  a  case  if  either  party  fails  to 
perform  his  promise,  he  will  be  liable  in  damages. 

A  promise,  in  order  to  be  valuable  consideration, 
must  be  one  that  is  capable  of  fulfillment,  and  the 
thing  promised  must  be  both  legal  and  moral  in  order 
to  be  sufficient  consideration.  An  agreement  or  a 
promise  to  do  that  which  is  illegal  is  not  sufficient 
consideration  to  support  an  agreement. 

There  must  also  be  a  legal  liability  within  the 
contemplation  of  both  parties  when  the  promise  is 
made.  Thus  a  promise  to  do  what  one  is  already 
bound  to  do  either  by  law  or  contract,  does  not 
furnish  consideration  for  a  contract,  since  there  is 
no  detriment  or  benefit 


26  CONTRACTS 

LESSON  VIII 
CONSIDERATION  —  CONTINUED 

27:  ADEQUACY  OF  CONSIDERATION. 

28.  CONSIDERATION  AS  TO  TIME. 

29.  MORAL  OBLIGATION  AS  CONSIDERATION. 

30.  FAILURE  OF  CONSIDERATION. 

27.  Adequacy   of    Consideration.  —  It   is   not    re- 
quired by  law  that  the  consideration  for  a  contract 
be  adequate  in  a  financial  sense,  except  in  a  contract 
for  the  exchange  of  money.     It  is  left  for  each  party 
to  determine  whether  the    consideration  which    he 
receives    for    his    promise    is    adequate.      The   only 
requirement  of  the  law  is  that  it  shall  be  a  benefit  to 
the  promisor  or  a  detriment  to  the  promisee,  how- 
ever slight  the  benefit  or  detriment  may  appear  to  be. 

One  who  pays  less  than  is  due  on  a  debt  which  he 
owes  does  nothing  that  he  is  not  obliged  to  do,  and 
therefore  such  payment  will  not  be  sufficient  con- 
sideration to  support  a  promise  on  the  part  of  the 
creditor  to  release  the  debtor  from  further  payment. 
Even  a  promise  to  extend  time  of  payment  must  be 
supported  by  consideration. 

28.  Consideration  as  to  Time.  —  In  point  of  time 
consideration  must  be  either  present  or  future.     Past 
acts  are  never  considered  valuable  consideration  upon 
which  to  base  a  promise  to  perform  an  act  in  the 
future.     For  example,  if  A  has  at  some  time  received 


CONSIDERATION  27 

a  benefit  from  B  for  which  he  was  not  bound  to  pay, 
and  A  now  makes  a  promise,  in  consideration  of  this 
past  service,  to  pay  a  certain  price  for  it,  his  promise  is 
not  enforceable  since  the  promisor  gave  nothing  for  it. 
At  the  time  the  service  was  rendered  it  was  merely 
voluntary,  and  no_J^^d_oJ)liga_t^  by 

either  party.  It  should  be  stated,  however,  that  if 
the  past  service  was  rendered  at  the  request  of  A, 
courts  of  law  are  inclined  to  modify  this  rule  regard- 
ing past  consideration,  and  to  treat  the  subsequent 
promise  of  payment  as  a  mere  expression  of  an  im- 
plied promise  made  at  the  time  the  service  was  re- 
quested. This  is  really  no  exception  to  the  rule,  as 
cases  of  this  kind  are  not  decided  on  the  ground  of 
past  consideration,  but  on  the  more  satisfactory 
ground  of  a  promise  implied  from  the  request  for  the 
service  when  made.  ^/ 

29.  Moral  Obligation  as  Consideration.  —  A  moral 
obligation   cannot   be   valuable   consideration   for   a 
contract.     A  son  is  under  the  strongest  obligation 
to  support  his  aged  parents,  but  a  promise  to  do  so 
because  of  this  obligation  is  unenforceable  as  there 
is  no  consideration. 

30.  Failure  of  Consideration. -- This  is  the  term 
that  is  applied  when  the  subject  matter  has  ceased 
to  exist  before  the  execution  of  the  contract  without 
the  fault  of  either  party.     In  such  a  case  the  con- 
tract   is    terminated   without    liability.      In    reality 
there  is  no  failure  of  consideration,  but  the  contract 


28  CONTRACTS 

is  terminated  because  the  continued  existence  of  the 
subject  matter  is  an  implied  term  of  the  contract. 
For  example,  A  agrees  to  buy  from  B  a  cargo  of  iron, 
to  be  shipped  from  Scotland  to  New  York,  and  B 
agrees  to  deliver  it  to  A  in  New  York.  On  the  voy- 
age the  ship  is  lost  at  sea.  Neither  party  is  respon- 
sible for  this  loss,  and  since  the  subject  matter  has 
ceased  to  exist,  the  courts  hold  that  the  contract  and 
all  liability  under  it  are  at  an  end. 


LESSON  IX 

DISCHARGE 

31.  DISCHARGE  OF  CONTRACT. 

31.  Discharge  of  Contract.  -  -  The  usual  method  of 
discharging  a  contract  is  by  performance  of  the 
agreement  by  all  parties  to  it.  It  sometimes  happens 
that  the  parties  to  a  contract  decide  to  release  each 
other  from  their  obligations,  and  make  a  new  agree- 
ment to  that  effect.  This  new  agreement  is  called 
Accord  and  Satisfaction.  This  discharges  the  old  con- 
tract provided  the  new  agreement  conforms  to  all 
the  requirements  of  a  contract. 

Again,  it  often  happens  that  the  fulfillment  of  a  con- 
tract by  one  or  both  parties  to  it  is  made  impossible 
by  circumstances  over  which  neither  party  has  con- 
trol. For  example,  a  law  may  have  been  passed  after 
the  making  of  a  contract  which  would  render  per- 


DISCHARGE  29 

formance  impossible.  A  contractor  agrees  to  build 
a  frame  house  for  A.  After  the  contract  is  made,  an 
ordinance  is  passed  prohibiting  the  building  of  frame 
houses  in  the  section  where  A's  property  is  located. 
This  law  would  of  course  excuse  the  contractor  from 
fulfilling  his  part  of  the  contract.  The  destruction 
of  the  subject  matter  of  a  contract  after  the  con- 
tract was  entered  into  would  excuse  the  fulfillment  of 
the  obligation  providing  the  destruction  did  not  occur 
through  the  neglect  of  the  party  desiring  to  be  ex- 
cused. 

It  must  not  be  understood  that  a  financial  impossi- 
bility to  perform  will  excuse  a  promisor  from  fulfilling 
his  promise  to  pay  a  certain  sum  of  money.  When  a 
party  undertakes  to  perform  a  certain  task  for 
another  or  deliver  certain  goods  to  another  without 
in  any  way  qualifying  his  promise,  he  is  bound  to 
fulfill  his  promise  or  pay  the  damages  that  may  result 
from  his  failure  to  do  so,  except  in  cases  such  as  are 
illustrated  in  the  preceding  paragraph.  The  manu- 
facturer who  agrees  to  deliver  a  quantity  of  goods  at 
a  certain  time,  is  not  excused  for  his  failure  to  fulfill 
his  obligation  which  was  caused  by  a  strike  among  his 
employees.  To  protect  himself  against  such  con- 
tingencies he  should  include  a  clause  to  that  effect 
in  his  contract. 

When  one  of  two  parties  to  a  written  contract 
alters  the  instrument  without  the  knowledge  of  the 
other  party,  and  with  intent  to  deceive  the  other 
party,  the  contract  cannot  be  enforced.  If,  how- 


30  CONTRACTS 

ever,  the  alteration  is  made  with  no  intention  to  de- 
ceive, the  original  contract  can  be  enforced  according 
to  its  terms.  For  example,  A  is  asked  by  B  to  give 
him  a  note  at  thirty  days  in  settlement  of  his  ac- 
count. A  does  so,  and  later  B  remarks  that  he  is 
sorry  that  he  did  not  ask  that  the  note  be  made 
payable  in  fifteen  days,  as  he  will  need  the  money  at 
that  time.  A  replies  that  he  would  have  been  per- 
fectly willing  to  have  made  the  note  for  that  time. 
Later  B  changes  the  note  to  read  fifteen  days  in  the 
belief  that  A  is  willing  to  pay  it  at  that  time.  A  may 
refuse  to  pay  the  note  before  the  expiration  of  the 
thirty  days.  The  alteration  having  been  made  in- 
nocently does  not  make  the  contract  void. 

Where  one  of  two  parties  fails  to  perform  his  part, 
the  other  party  is  relieved  from  further  obligation. 
Even  if  the  party  has  merely  stated  that  he  will  not 
perform  his  part,  the  other  party  may  immediately 
bring  an  action  for  breach  of  the  contract. 

Contracts  are  occasionally  of  such  a  nature  that 
it  is  possible  for  one  of  the  parties  to  fail  to  perform 
a  part  of  the  contract  without  giving  the  other  party 
the  right  to  assume  that  the  entire  contract  is  broken. 
Such  contracts  are  said  to  be  divisible.  Indivisible 
contracts  are  those  in  which  a  breach  of  one  of  the 
parts  of  the  contract  by  one  party  will  enable  the 
other  party  to  consider  the  entire  contract  broken. 
It  is  sometimes  very  difficult  to  determine  whether  a 
contract  is  intended  by  the  parties  to  be  divisible  or 
indivisible.  This  question  of  divisibility  is  raised 


DISCHARGE  31 

most  often  in  contracts  for  the  sale  of  a  certain  quan- 
tity of  merchandise,  to  be  delivered  in  installments. 
The  important  question  in  such  cases  is  whether  the 
failure  to  deliver  one  of  the  installments  will  act  as  a 
breach  of  the  entire  contract.  In  the  United  States 
it  is  generally  held  that  such  contracts  are  indivisible, 
and  therefore  a  failure  to  deliver  any  one  of  the  in- 
stallments will  act  as  a  breach  of  the  entire  contract. 

Discharge  of  the  contract  may  result  through  an 
act  committed  by  one  party  to  the  contract  that 
makes  performance  impossible.  For  example,  A 
agrees  to  deliver  his  horse  to  B  within  thirty  days  and 
receive  two  hundred  dollars  in  cash  for  him.  The 
following  day  A  sells  the  horse  to  a  third  party.  By 
this  act  he  makes  performance  of  his  part  of  the  orig- 
inal contract  impossible,  and  the  other  party  is  not 
bound  to  wait  until  the  expiration  of  the  thirty  days 
before  beginning  proceedings  for  breach  of  contract. 

Failure  to  accept  legal  tender  does  not  discharge 
the  obligation  of  the  one  offering  it,  but  merely 
places  the  responsibility  of  collection  and  costs  of  a 
legal  action  on  the  one  refusing  it  and  cuts  off  in- 
terest which  may  otherwise  be  collected  on  overdue 
debts. 

It  should  be  understood  that  notes,  checks,  or  any 
other  form  of  promise  to  pay  money  need  not  be 
accepted  in  settlement  of  debts,  as  they  are  not  legal 
tender.  If  accepted,  they  are  merely  conditional 
payments  unless  it  is  otherwise  provided.  When  a 
person  fails  to  pay  a  note,  the  party  holding  it  may 


32  CONTRACTS 

return  the  note  and  sue  upon  the  original  debt,  or 
he  may  hold  the  note  and  make  it  the  basis  of  the 
action.  If  the  note  of  a  third  party  is  taken  in 
settlement  of  a  debt,  it  is  generally  accepted  as  an 
unconditional  payment  except  for  the  rights  which 
the  transferee  has  against  the  transferer  as  indorser. 

When  one  party  contracts  to  furnish  another  party 
a  certain  thing  and  stipulates  that  the  thing  when 
delivered  shall  be  entirely  satisfactory,  he  is  bound  to 
respect  the  judgment  of  the  second  party  in  a  matter 
of  personal  taste,  as,  for  example,  a  suit  of  clothes. 
But  in  the  case  of  articles  like  machinery,  where  per- 
sonal taste  does  not  enter  in,  the  contract  is  satis- 
factorily carried  out  if  experts  so  decide,  the  buyer 
to  the  contrary  notwithstanding. 

A  contract  will  be  discharged  when  the  parties  to  it 
agree  to  substitute  a  higher  form  of  contract,  as,  for 
example,  where  a  sealed  contract  takes  the  place  of  an 
unsealed  one. 

LESSON  X 
DISCHARGE  —  CONTINUED 

32.  NATIONAL  BANKRUPTCY  ACT. 

33.  STATUTE  OF  LIMITATIONS. 

32.  National  Bankruptcy  Act. — A  National  Bank- 
ruptcy Law  was  passed  by  Congress  in  1898.  This 
law  provides  that,  "Any  person  owing  debts  except 
a  corporation  shall  be  entitled  to  file  a  voluntary 


c 


DISCHARGE  33 

petition  in  bankruptcy.  Any  natural  person,  ex- 
cept a  wage  earner,  or  a  person  engaged  chiefly  in 
farming  or  the  tillage  of  the  soil,  any  unincorporated 
company,  and  any  corporation  engaged  principally 
in  manufacturing,  trading,  publishing,  mining,  or 
mercantile  pursuits,  owing  debts  to  the  amount  of 
$1000  or  over,  may  be  adjuged  an  involuntary 
bankrupt  upon  default  or  impartial  trial  and  shall 
be  subject  to  the  provisions  and  entitled  to  the 
benefits  of  this  act.  Private  bankers,  but  not 
national  banks  or  banks  incorporated  under  State  or 
Territorial  laws,  may  be  adjudged  involuntary 
bankrupts." 

As  soon  as  the  voluntary  petition  in  bankruptcy 
is  filed,  or  after  a  party  has  been  adjudged  a  bank- 
rupt upon  an  involuntary  petition,  it  then  becomes 
his  duty  to  aid  the  court  in  every  possible  way  in  the 
work  of  ascertaining  the  amount  of  property  which 
he  owns  and  also  the  total  amount  of  his  debts.  A 
trustee  in  bankruptcy  is  appointed  by  the  creditors, 
and  it  is  the  duty  of  such  trustee  to  take  over  all  the 
property  of  the  bankrupt,  except  such  as  may  be 
exempt  under  the  law,  and  dispose  of  it  for  the  benefit 
of  the  creditors.  When  the  interests  of  the  creditors 
require  it,  the  trustee  may  continue  the  business  of 
the  bankrupt  for  a  given  time  to  prevent  unnecessary 
sacrifice  incident  to  a  forced  sale. 

A  person  who  commits  certain  acts  may  be  ad- 
judged an  involuntary  bankrupt  upon  the  petition  of 
his  creditors.  Among  these  acts  are  the  following  : 


34  CONTRACTS 

Making  any  disposition  of  his  property  with  intent 
to  hinder,  delay,  or  defraud  his  creditors,  or  any  of 
them ;  transferring,  while  insolvent,  any  part  of  his 
property  to  one  or  more  of  his  creditors  with  intent 
to  give  such  creditors  advantage  over  other  credi- 
tors ;  applying  for  a  receiver  or  trustee  for  his  prop- 
erty after  becoming  insolvent ;  admitting  in  writing 
that  he  is  unable  to  pay  his  debts  and  that  he  is 
willing  to  be  declared  a  bankrupt  for  that  reason. 

After  one  month,  and  within  twelve  months  after 
being  declared  a  bankrupt,  he  may  file  an  application 
for  his  discharge  in  bankruptcy  and  the  judge  shall 
grant  the  discharge  unless,  at  a  hearing  which  is  held 
to  ascertain  the  right  of  the  bankrupt  to  be  dis- 
charged in  bankruptcy,  it  shall  appear  that  he  has 
been  guilty  of  some  irregularity  in  connection  with 
the  settlement  of  his  estate,  or  that  certain  require- 
ments of  the  law  have  not  been  met.  When  the 
bankrupt  has  been  discharged,  he  is  free  from  any 
further  obligation  on  account  of  contracts  which  he 
had  entered  into  prior  to  his  becoming  a  bankrupt. 

33.  Statute  of  Limitations.  —  In  the  different  states 
a  Statute  of  Limitations  has  been  enacted  which 
provides  that  actions  founded  on  contracts  shall  be 
brought  within  a  specified  time  or  no  action  can  be 
maintained.  The  purpose  of  this  statute  is  to  re- 
quire a  settlement  of  claims  before  they  have  run  so 
long  as  to  make  it  practically  impossible  to  secure 
satisfactory  evidence  concerning  them.  Under  mod- 
ern interpretation  of  this  law  it  is  not  assumed  that  a 


DISCHARGE  35 

debt  is  paid  after  the  statutory  period  has  run,  but 
merely  that  it  has  run  so  long  that  it  is  difficult  for 
a  complainant  to  secure  the  necessary  evidence  to 
prove  his  claim.  The  best  evidence  of  this  interpre- 
tation of  the  law  is  seen  in  the  fact  that  under  certain 
circumstances  a  claim  may  be  revived. 

The  contracts  of  most  importance  that  are  barred 
by  the  Statute  of  Limitations  are  open  accounts, 
written  instruments,  sealed  instruments,  and  judg- 
ments. In  the  different  states  the  statutory  period 
on  open  accounts  varies  from  two  to  eight  years,  but 
in  the  majority  of  states  the  statutory  period  is  six 
years.  The  period  on  sealed  instruments  varies 
from  four  to  twanty  years.  Actions  on  judgments  in 
the  different  states  may  be  brought  in  most  cases 
within  twenty  years,  but  the  time  stated  in  the  differ- 
ent statutes  varies  from  five  to  twenty  years.  Each 
student  should  consult  the  statute  in  his  own  state 
for  the  actual  statutory  period. 

The  statute  begins  to  run  in  nearly  all  states  at  the 
time  when  the  complaining  party  is  first  entitled  to 
bring  his  suit  on  the  particular  claim.  Ordinarily, 
ignorance  of  the  facts  which  give  the  cause  of  action 
will  not  have  any  effect  on  the  beginning  of  the  statu- 
tory period  ;  however,  if  there  is  fraudulent  conceal- 
ment, the  statutory  period  will  begin  to  run  only 
after  knowledge  of  the  facts  has  been  obtained  by  the 
complaining  party.  The  running  of  the  statutory 
period  will  be  interrupted  by  the  absence  of  the 
debtor  from  the  state.  When  one  against  whom 


36  CONTRACTS 

complaint  is  made  is  under  a  disability  of  any  kind, 
such  as  insanity,  infancy,  etc.,  the  period  will  begin 
only  after  that  disability  has  been  removed. 

An  old  debt  may  be  the  consideration  for  a  new 
promise  to  pay  an  account,  even  though  collection  of 
the  account  has  been  barred  by  the  statute  of  limita- 
tions. This  new  promise  must  be  made  to  the  com- 
plainant or  his  agent  or  any  one  who  has  been  ex- 
pressly authorized  to  convey  the  promise  to  him. 

Any  acknowledgment  on  the  part  of  a  debtor  to  his 
creditor  that  the  outlawed  debt  is  owing,  revives  the 
obligation,  and  an  action  is  maintainable  on  it  be- 
cause the  law  implies  that  one  who  acknowledges  that 
he  owes  any  one  intends  in  that  acknowledgment  to 
make  a  promise  to  pay  his  debt.  In  some  states  it  is 
required  that  the  new  promise  or  acknowledgment 
be  in  writing. 

When  a  part  payment  of  an  outlawed  debt  is 
made,  or  when  interest  on  such  a  debt  is  paid,  the 
effect  is  to  acknowledge  the  existence  of  the  debt  and 
thereby  renew  the  promise  of  payment,  and  the 
statutory  period  will  run  the  full  time  from  such  a 
payment. 

LESSON  XI 

SPECIAL   REQUIREMENTS 
34.  STATUTE  OF  FRAUDS  —  FOURTH  SECTION. 

34.  Statute  of  Frauds.  —  It  has  been  made  clear 
that  no  particular  form  is  necessary  in  making  or- 


SPECIAL   REQUIREMENTS  37 

dinary  contracts.  They  may  be  made  orally  or  in 
writing.  If  written,  they  may  be  sealed  or  unsealed. 
They  may  be  made  by  implication,  and  in  such  cases 
the  terms  are  not  even  expressed.  There  are  some 
contracts  which  by  their  nature  are  easily  misunder- 
stood by  the  parties  to  them,  or  are  not  easily  proved 
in  case  a  legal  action  is  founded  upon  them.  In  the 
year  1676  England  passed  a  law  the  intention  of 
which  was  to  prevent  fraud  and  perjuries,  and  that 
law  contained  one  section  known  as  "  The  fourth 
section  of  the  Statute  of  Frauds/'  that  provided  as 
follows  : 

''  No  action  shall  be  brought  whereby  to  charge 

(a)  Any   executor   or    administrator    upon 
any  special  promise  to  answer  damages  out  of 
his  own  estate ; 

(b)  Or   whereby  to    charge    the  defendant 
upon   any  special  promise  to  answer  for  the 
debt,  default,  or  miscarriage  of  another  per- 
son ; 

(c)  Or  to  charge  any  person  upon  any  agree- 
ment made  in  consideration  of  marriage ; 

(d)  Or  upon  any  contract  for  the   sale  of 
lands,    tenements,    or   hereditaments    or   any 
interest  in  or  concerning  them ; 

(e)  Or  upon  any  agreement  that  is  not  to 
be  performed  within  the  space  of  one  year  from 
the  making  thereof; 

unless  the  agreement  upon  which  such  action  shall 
be  brought,  or  some  memorandum  or  note  thereof, 


38  CONTRACTS 

shall  be  in  writing  and  signed  by  the  party  to 
be  charged  therewith,  or  some  person  thereunto 
by  him  lawfully  authorized." 

It  will  be  seen  that  contracts  of  the  kind  specified 
in  the  above  statute  could  not  be  enforced  in  a  court 
of  law  unless  the  complaining  party  could  produce 
some  written  evidence  signed  by  the  party  against 
whom  he  complains,  tending  to  show  that  the  con- 
tract in  question  was  actually  made. 

These  contracts  are  all  likely  to  be  the  subject  of 
litigation,  and  when  oral  proof  alone  is  available  it 
is  difficult  to  arrive  at  a  satisfactory  settlement. 
Nearly  all  of  the  states  have  enacted  a  similar  statute, 
and  in  most  cases  it  is  substantially  the  same  as  the 
old  English  law.  It  should  be  remembered  that 
this  statute  does  not  make  oral  contracts  of  this  class 
void,  but  merely  provides  that  no  action  can  be 
maintained  regarding  them  unless  there  is  *a  satis- 
factory note  or  memorandum.  This  memorandum 
may  be  secured  after  the  contract  is  entered  into, 
and  will  be  just  as  valuable  for  the  purposes  of  this 
statute  as  if  it  had  been  secured  prior  to  the  conclu- 
sion of  the  contract. 

Administrator  or  executor's  promise.  —  It  often 
happens  that  an  administrator  or  executor  will  be 
called  upon  by  creditors  of  the  deceased  party  for 
information  regarding  the  amount  that  will  be  re- 
ceived by  them  when  the  estate  is  settled.  An  ad- 
ministrator or  executor  would  be  likely  to  give  an 
estimate  of  the  amount  that  would  be  paid,  and  it  is 


SPECIAL  REQUIREMENTS  39 

very  easy  for  the  creditor  to  read  into  what  the  ad- 
ministrator, or  executor,  says,  a  promise  to  pay  the 
amount  stated.  Such  an  officer  might  even  go  fur- 
ther, and  by  way  of  emphasizing  his  own  belief  that 
the  amount  stated  would  be  paid,  promise  in  an  off- 
hand  way  that  if  the  estate  was  insufficient  to  make 
such  payment  he  would  pay  it  out  of  his  own  pocket. 
This  statement  is  made  with  no  thought  of  legal 
obligation.  Under  the  statute  no  promise  of  an  ad- 
ministrator or  executor  to  pay  out  of  his  own  pocket 
any  sum  that  should  be  paid  by  the  estate  can  be 
enforced,  unless  the  party  seeking  to  enforce  such 
promise  can  produce  a  written  memorandum  signed 
by  the  administrator  or  executor,  or  a  properly 
authorized  agent. 

Promise  to  go  security  for  the  obligations  of  another. 
-  It  is  common  practice  for  one  who  is  a  stranger  in 
a  community  to  ask  a  friend  to  introduce  him  to  the 
merchants  with  whom  he  expects  to  deal.  It  often 
happens  that  the  merchant  to  whom  such  strangers 
are  introduced  reads  into  the  introduction  a  promise 
on  the  part  of  the  introducing  party  to  answer  for 
the  debts  of  the  one  who  is  being  introduced.  In 
many  cases  the  statement  at  the  time  of  the  intro- 
duction might  be  taken  to  mean  just  this,  but  in 
most  cases  no  such  intention  is  present  in  the  minds  of 
any  of  the  parties  concerned.  To  avoid  needless 
litigation  over  such  imaginary  obligations,  the  Statute 
of  Frauds  provided  that  no  man  can  be  held  to 
answer  for  any  debt  or  default  of  another  person 


40  CONTRACTS 

unless  some  written  evidence  of  his  obligation  can 
be  produced. 

Marriage  contracts.  —  All  contracts  for  the  pay- 
ment of  money  or  for  the  settlement  of  property  in 
consideration  of  marriage  must  be  evidenced  in 
writing  to  enable  an  injured  party  to  recover  damages 
in  an  action  at  law.  The  nature  of  such  contracts  is 
such  that  it  is  very  difficult  to  secure  evidence  con- 
cerning the  contract,  unless  it  has  been  reduced  to 
writing.  Contracts  of  this  class  are  usually  made  in 
secret,  and  litigation  may  result  from  misunder- 
standing on  the  part  of  one  or  both  of  the  persons 
interested. 

Real  property  contracts.  —  Any  contract  for  the 
sale  of  real  property,  or  any  interest  in  or  concerning 
it,  must  be  evidenced  in  writing  to  enable  either  party 
to  bring  action  for  its  breach.  It  is  assumed  that 
where  such  important  interests  as  those  connected 
with  real  property  are  concerned,  the  contracting  par- 
ties will  for  their  own  protection  have  some  written 
memorandum  of  their  agreement.  The  amount  in- 
volved is  usually  large  enough  to  justify  this  require- 
ment of  the  statute. 

Contracts  not  to  be  completed  within  a  year.  -  -  This 
class  of  contracts  is  included  in  the  list  of  those  re- 
quiring written  evidence  because  of  the  difficulty  of 
securing  evidence  to  prove  them  after  such  a  long 
period  of  time  has  elapsed.  Under  this  section  of  the 
statute  only  those  contracts  which  by  their  nature 
could  not  be  completed  within  a  year  are  included. 


CASES  ON  CONTRACTS  41 

For  example,  a  contract  made  between  A  and  B 
whereby  A  agreed  to  board  and  care  for  an  aged 
parent  of  B  during  his  lifetime  would  be  an  enforce- 
able contract  even  though  no  written  evidence  could 
be  produced,  as  it  is  a  contract  which  could  be  ful- 
filled within  the  space  of  a  year.  The  parent  might 
live  many  years,  but  the  fact  that  fulfillment  within  a 
year  was  within  the  contemplation  of  the  parties,  as 
a  possibility,  at  the  time  of  entering  into  the  contract 
takes  it  out  of  the  operation  of  the  statute. 

A  contract  for  a  year's  labor  where  the  term  of 
service  is  to  begin  the  following  day,  or  later,  comes 
under  the  statute,  because  at  least  a  year  and  a  day 
will  be  required  for  its  fulfillment. 

In  New  York  state  an  oral  lease  of  land  for  one 
year  is  valid,  and  no  written  evidence  is  required  even 
though  the  period  for  which  the  property  is  leased  is 
not  to  begin  until  a  future  date.  A  special  statute 
makes  this  an  exception  to  the  general  rule  under  the 
Statute  of  Frauds.  Many  states  have  enacted  a 
statute  requiring  that  all  leases  of  real  property  be 
made  in  writing. 


LESSON  XII 

35.  CASES  ON  CONTRACTS. 

(i)  White  v.  Corlies,  46  N.  Y.  467.  —  White  was 
a  builder  and  Corlies  was  a  merchant.  Corlies  gave 
White  specifications  for  fitting  up  offices  at  57  Broad- 


42  CASES  ON  CONTRACTS 

way  and  requested  him  to  make  an  estimate  of  the 
cost  of  doing  the  work.  This  was  in  September. 
On  the  28th  of  that  month,  White  left  his  estimate 
with  Corlies  for  consideration  and  requested  that  he 
be  notified  when  a  conclusion  was  reached.  On  the 
same  day  Corlies  changed  the  specifications  and  sent 
White  a  new  copy,  including  the  changes,  for  his 
approval.  White  showed  his  assent  to  the  change  by 
signing  the  specifications  and  returning  them  to 
Corlies.  The  next  day  Corlies  'wrote  to  White 
stating  that  if  he  would  finish  up  the  offices  at  57 
Broadway  in  two  weeks  from  that  date,  he  could  be- 
gin work  at  once.  White  did  not  reply  to  this  note, 
but  immediately  commenced  performing  the  con- 
tract by  purchasing  lumber  and  beginning  work. 
The  next  day  Corlies  notified  White  that  he  had 
changed  his  mind  and  did  not  care  to  have  the  work 
done.  White,  having  gone  to  some  expense  and  per- 
formed a  part  of  the  work,  brought  an  action  against 
Corlies  to  recover  damages. 

(2)  Fogg  v.  Portsmouth  Atheneum,  44  N.  H.  115.— 
Portsmouth  Athenaeum  is  a  corporation  organized  to 
conduct  a  library  and  public  reading  room.  Some 
magazines  are  subscribed  for  and  paid  for  by  the 
Athenaeum,  while  others  are  donated  by  friends  of 
the  institution.  The  '  Independent  Democrat  " 
was  taken  and  paid  for  by  the  Athenaeum  for  a  cer- 
tain period  of  time.  When  the  bill  was  settled  a 
memorandum  was  made  on  the  back  of  it  that  the 
Athenaeum  no  longer  desired  the  paper.  A  few  days 


CASES   ON  CONTRACTS  43 

later  the  owners  of  the  paper  sold  their  business  to 
Fogg,  who,  without  knowledge  of  this  notice  to  dis- 
continue the  paper,  continued  to  send  it  for  several 
years.  This  action  was  brought  by  Fogg  against 
the  Athenaeum  to  recover  for  subscription  price  of 
the  paper.  The  paper  had  been  received  and  placed 
upon  the  shelves  by  the  Athenaeum  each  week. 

(3)  Fitch  v.  Snedaker,  38  N.  Y.  248.  —  Snedaker 
published  a  notice  offering  a  reward  of  two  hundred 
dollars  to  any  person  who  would  give  information 
that  would  lead  to  the  arrest  and  conviction  of  the 
person  guilty  of  a  certain  murder.     On  the  following 
day  Fitch,  who  had  not  seen  the  notice  of  reward, 
furnished  evidence  that  led  to  the  arrest  and  convic- 
tion of  Fee  for  the  murder  mentioned  in  the  notice. 
This  action  was  brought  by  Fitch  to  recover  the  re- 
ward offered  in  the  notice. 

(4)  Jackson  v.  Bartholomew,  20  Johns.  28.  —  Jack- 
son owned  a  wheat  stubble  field  in  which  Bartholo- 
mew had  a  stack  of  wheat  which  he  had  promised 
to  remove  in  season  for  Jackson  to  prepare  his  field 
for  a  fall  crop.     The  time  for  removal*  arrived,  and 
Jackson  sent  word  to  Bartholomew  requesting  im- 
mediate removal  of  the  stack  of  wheat,  as  he  wished  to 
burn   over   the   stubble   next   day.     Bartholomew's 
sons  agreed  to  remove  the  "stack  by  ten  o'clock  the 
following  morning.     Jackson  waited  until  that  hour, 
and  then  set  fire  to  the  stubble  in  a  remote  part  of  the 
field.     Later,  Jackson  discovered  that  the  stack  had 
not   been   removed,  and,  fearing   that   it  would   be 


44  CASES  ON   CONTRACTS 

burned,  set  to  work  and  removed  it  himself.  This 
action  was  brought  to  recover  damages  for  work  and 
labor  in  its  removal. 

(5)  Minneapolis  and  St.  Louis  Railway  v.  Colum- 
bus Rolling  Mill,  119  U.  S.  149.  —  Columbus  Rolling 
Mill  offered,  by  letter  dated  December  8th,  to  sell  the 
railway  company  two  thousand  to  five  thousand  tons 
of  iron  rails  on  certain  terms,  and  also  stated  that  if 
the  offer  was  accepted,  a  notice  to  that  effect  must 
be  received  prior  to  December  2Oth.     On  December 
1 6th  the  railway  company  sent  a  telegram  and  a  let- 
ter referring  to  the  rolling  mill's  letter  of  December 
8th,  ordering  twelve  hundred  tons  on  the  terms  stated. 
On  the  1 8th  of  December  the  rolling  mill  declined  by 
telegram  to  fulfill  the  railway  company's  order.     On 
the    I9th   of  December  the   railway   company   tele- 
graphed an  order  for  two  thousand  tons  of  rails  in 
accordance  with  the  proposition  made  on  December 
8th.     The   rolling   mill   refused  to  fulfill  this  order, 
claiming  that  their  offer  had  lapsed. 

(6)  Trainer  v.  Trumbull,l^l  Mass.  527.  -  -  Trum- 
bull,  the  defendant  in  this  case,  was  an  infant  who  had 
no  property  in  his  possession,  but  had  a  reasonable 
expectation  of  inheriting  a  fortune  of  $10,000.     His 
guardian  placed  him  in  the  almshouse,  but  he  was 
taken  out  by  the  plainttff,  who  furnished  him  with 
board,  clothing,  etc.,  upon  his  promise  to  pay  what 
these  things  were   reasonably  worth  when   he  came 
into  possession  of  the  expected  fortune.     This  action 
was  brought  to  recover  on  the  defendant's  promise. 


CASES   ON  CONTRACTS  45 

(7)   Diamond  Match  Co.  v.  Roeber,  106  N.  Y.  473. 

-  The  defendant,  Roeber,  was  the  inventor  of  the 
friction  match,  and  in  August,  1880,  he  sold  all  of 
his  right,  title,  and  interest  in  this  patent,  together 
with  the  exclusive  right  to  manufacture  friction 
matches  anywhere  in  the  United  States  except  in 
the  state  of  Nevada  and  in  the  territory  of  Montana, 
to  Swift  &  Courtney  &  Beacher  Co.  He  also  agreed 
not  to  engage  in  the  manufacture  or  sale  of  friction 
matches  at  any  time  except  as  an  employee  of  the 
company  to  whom  he  sold  this  patent  right.  This 
company  later  transferred  their  rights  in  the  friction 
match  business  to  the  plaintiffs  in  this  case,  the 
Diamond  Match  Co.  Roeber,  after  serving  several 
years  in  the  employ  of  the  company  to  whom  he  as- 
signed his  patent  right,  entered  into  a  contract  with  a 
rival  match  company,  in  New  Jersey,  under  which 
he  was  to  become  their  superintendent.  He  also 
opened  a  store  in  New  York  for  the  sale  of  matches 
other  than  those  manufactured  by  the  plaintiff.  This 
action  was  brought  to  restrain  Roeber  from  engaging 
in  the  manufacture  or  sale  of  matches  in  violation  of 
his  contract. 

(8)  Love  v.  Harvey,  114  Mass.  80. --The  defend- 
ant made  a  wager  with  the  plaintiff  as  to  the  place 
of  burial  of  one  Dr.  Cahill.  The  defendant  claimed 
that  Dr.  Cahill  was  buried  on  the  right-hand  side 
of  the  main  avenue  of  the  cemetery,  and  the  plaintiff 
contended  that  he  was  buried  on  the  left-hand  side 
of  that  avenue.  Twenty  dollars,  the  amount  of  the 


46  CASES  ON  CONTRACTS 

wager,  was  placed  in  the  hands  of  James  Stack,  who 
had  agreed  to  act  as  stakeholder.  It  was  determined 
that  the  body  was  buried  on  the  left-hand  side  of  the 
avenue,  but  before  the  money  was  turned  over  to 
Harvey,  the  winner,  Love  ordered  Stack,  in  the  pres- 
ence of  Harvey,  to  give  him  back  the  twenty  dollars 
which  he  had  placed  in  his  hands.  The  stakeholder, 
however,  paid  all  the  money  over  to  Harvey,  who  re- 
fused, upon  request,  to  return  the  twenty  dollars  to 
Love.  This  action  was  brought  to  secure  the  twenty 
dollars  which  Love  claims  was  wrongfully  paid  over 
to  Harvey. 

(9)  Smith  v.  Whildin,  10  Penn.  St.  39.  —  Smith, 
the  plaintiff,  was  a  constable  in  Philadelphia,  and  the 
defendant,  Whildin,  offered  him  $100  for  the  arrest  of 
M.  Crossin,  against  whom  warrants  had  been  issued 
on  a  charge  of  obtaining  goods  under  false  pretenses. 
Smith  secured  the  arrest  of  Crossin  on  the  warrants 
which  had  been  sworn  to,  and  then  brought  this  action 
to  recover  the  $100  which  Whildin  had  promised  him. 

(10)  Duplex    Safety     Boiler    Co.    v.    Garden,    101 
N.  Y.  387.  --  The  plaintiffs  in  this  case  entered  into  a 
contract  with  the  defendant  wherein  it  was  agreed 
that  they,  the  plaintiffs,  should  alter  boilers  belong- 
ing to  the  defendant  and  perform  all  the  work  con- 
nected with  the  repair  of  these  boilers,  and  complete 
the  job  by  the  loth  of  May  following.     It  was  further 
agreed  that  the  work  should  be  done  in  such  a  manner 
as  to  satisfy  the  defendant  that  the  boilers  as  changed 
were  a  success  and  that  they  would  not  leak  under  a 


CASES  ON  CONTRACTS  47 

pressure  of  100  pounds  of  steam.  The  work  was  done 
and  the  boilers  were  turned  over  to  the  defendant 
within  the  stated  time.  They  were  accepted  and 
used  by  the  defendant.  Later,  upon  being  requested 
to  make  payment,  the  defendant  said  the  boilers 
were  not  satisfactory  and  refused  to  pay.  Experts 
were  called  in,  and  after  a  thorough  examination  by 
them,  the  boilers  were  pronounced  satisfactory  in 
every  way. 

LESSON  XIII 

(i)  Peters  v.  Westborough,  19  Pick.  (Mass.)  364.— 
This  was  an  action  brought  to  recover  from  the  town 
of  Westborough  for  the  support  of  one  Catherine 
Ladds.  The  facts  were  as  follows  :  John  Ladds,  the 
father  of  Catherine  Ladds,  entered  into  a  contract 
with  the  plaintiff,  Peters,  in  which  it  was  agreed  that 
Catherine  Ladds  should  be  taken  into  the  Peters 
family,  where  she  was  to  be  supported  in  exchange 
for  her  services  until  she  was  eighteen  years  of  age, 
if  after  one  month's  trial  she  proved  satisfactory. 
At  the  end  of  the  first  month  plaintiff  expressed  him- 
self as  being  satisfied  with  her,  and  she  continued  to 
render  services  for  about  nine  months,  when  she  was 
taken  ill,  and  plaintiff  notified  the  overseer  of  the 
poor  of  the  town  that  he  would  expect  the  town  to 
support  her  as  her  father  was  not  willing  to  do  so. 
No  action  was  taken  by  the  town  of  Westborough, 
and  after  a  few  months  she  died.  The  plaintiff  now 


48  CASES  ON  CONTRACTS 

seeks  to  recover  of  the  town  for  her  care.     The  con- 
tract between  Peters  and  Ladds  was  an  oral  one 

(2)  In  Strong  v.  Foote,  42  Conn.  203,  the  defend- 
ant, a  minor  fifteen  years  of  age  and  the  owner  of  a 
large  fortune,  had  his  teeth  filled  by  the  plaintiff,  a 
dentist.     The  bill  rendered  amounted  to  $93.     It  was 
proved  that  the  teeth  were  decayed  and  pained  the 
defendant. 

(3)  In  Carpenter  v.  Carpenter,  45  Ind.  142,  plain- 
tiff, an  infant,  had  traded  horses.     He  tired  of  his 
bargain,  and,  having  tendered  back  the  horse  he  re- 
ceived, demanded  his  original  horse.     It  was  refused. 

(4)  In  Kendall  v.  Lawrence,  22  Pick.  (Mass.)  540, 
an  infant  deeded  certain  land  to  another  and  after 
becoming  of  age  neither  voided  nor  confirmed  the 
deed.     After  he  became  of  age  creditors  of  the  infant 
tried  to  set  aside  the  sale  and  take  the  land  on  attach- 
ment. 

(5)  Morton  v.  Steward,  5  Bradwell  (111.),  533,  was 
an  action  on  a  note  given  by  an  infant,  and  it  was 
proved  that  the  consideration  was  necessaries  fur- 
nished the  infant.     The  amount  of  the  note  showed 
that   an   excessive   price   had   been   charged   for  the 
necessaries. 

(6)  In  Spencer  v.  Carr,  45  N.  Y.  406,  the  parents 
of  an  infant  six  years  of  age  deeded  real  estate  to 
her.      Subsequently,  the  parents    deeded    the    same 
property  in  trust  to  another,  and  the  infant,  at  the 
mother's  request,  signed  the  deed.     Could  the  deed 
be  set  aside  by  the  infant  ? 


CASES  ON  CONTRACTS  49 

(7)  Peters  v.  Fleming,  6  M.  &  W.  (Eng.)  41,  was  an 
action  in  an  English  court  for  a  bill  of  goods  sold  de- 
fendant, an  infant.     They  consisted  of  four  finger 
rings,  a  watch  chain,  some  pins,  etc.,  amounting  to 
over  eight  pounds  sterling.     The  plaintiff  sought  to 
hold   the   defendant    for   necessaries.      It    appeared 
that  the  defendant  was  a  student  at  the  University 
of  Cambridge,  that    his  father  was   a  gentleman  of 
fortune  and  a  Member  of  Parliament. 

(8)  In  Hyman  v.   Cain,  48  N.  C.  in,  defendant, 
who  was  an  orphan  about  nine  years  of  age,  boarded 
with  the  plaintiff  for  about  two  years.     An  action 
was  brought  for  his  board. 

(9)  Sterling  v.  Sinnickson,  5  N.  J.  L.  756,  was  an 
action  upon  a  written  instrument  promising  to  pay 
plaintiff  $1000,  provided  he  was  not  married  within 
six  months. 

(10)  In  Herreshoff  v.  Boutineau,  17  R.  I.  3,  plain- 
tiff hired  defendant  as  a  teacher  of  languages  for  six 
months,  and  defendant  covenanted  not  to  teach  the 
French  and  German  languages  for  any  other  person 
within  the  state  of  Rhode  Island  for  one  year  there- 
after.    This   action  was  brought  on  a  breach  of  the 
contract  by  defendant. 


LESSON  XIV 

(i)   In  Perkins  v.    Clay,  54  N.  H.  518,  defendant 
sold  his  cart  and  butcher  business  for  $90  and  agreed 


50  CASES  ON  CONTRACTS 

that  he  would  not  carry  on  the  same  business  on  the 
same  route  for  two  years.  Defendant,  having  broken 
his  contract,  was  sued  for  damages. 

(2)  In    National  Benefit    Co.    v.    Union    Hospital 
Co.,  45  Minn.   272,  the  parties  were  two  companies 
engaged  in  issuing  benefit  certificates  entitling  the 
holders  to  care  and    medical  treatment  in   case   of 
sickness   or  injury.     Plaintiff  had   acquired   a   good 
business    in   Minnesota,    Wisconsin,    and    northern 
Michigan,  and  entered  into  a  contract  with  defendant 
agreeing  for  a  certain  consideration  to   refrain   for 
three  years  from  doing  business  in  this  territory  ex- 
cept  with    railway    employees.     Was    the    contract 
valid  ? 

(3)  In    Johns  v.  Fritchey,  39    Md.   258,    a   party 
sought  to  avoid  a  power  of  attorney  given  by  him, 
on  the  ground  that  he  was  intoxicated  when  it  was 
given. 

(4)  In    Carpenter  v.   Rodger -j,  61    Mich.   384,  the 
plaintiff  traded  a  good  team  of  horses,  worth  $150 
to  $200,  with  defendant,  a  horse  dealer,  for  a  team 
worth  about  $75.     It  was  shown  that  plaintiff  was  of 
feeble  mind  and   scarcely  able  to  do  business,  and 
that  when  the  deal  was   made  he  was  intoxicated 
to    such    a    degree  that  he  did  not  know  what  he 
was  doing.     What  must  the  plaintiff  do  to  set  aside 
the  contract  ? 

(5)  Gribben  v.  Maxwell,  34   Kan.  8,  was  an  action 
to  set  aside  a  conveyance  of  real  property  executed 
by  one  Olive   Gribben,    a   lunatic.     The   purchaser 


CASES  ON   CONTRACTS  51 

did  not  know  of  plaintiff's  insanity,  and  paid  a  fair 
price  for  the  property.  The  grantor  had  not  been 
judicially  declared  insane. 

(6)  In  Bush  v.  Breinig,    113    Pa.  St.  310,  Breinig 
attended  a  public  sale  of  real  property,  and  having 
made  the  highest  bid,  the  property  was  struck  off  to 
him.     Afterwards,  while  so  drunk  as  to  be  deprived 
of  reason  and  understanding,  he  executed  a  written 
contract  of  purchase  and  paid  part  of  the  purchase 
price.     Thereafter  he  sought  to  avoid  the  contract 
and  brought  action  to  recover  the  money  paid. 

(7)  In  Carter  v.  Beckwith,  128  N.  Y.  312,  plaintiff, 
an   attorney,  upon  the  request  of  B,  who  had  been 
legally    declared    insane,    instituted    proceedings    to 
have  him  adjudged  sane,  and  to  have  the  control  of 
his  property  restored  to  him.     In  this  proceeding  it 
was  determined  that  he  was  still  insane,  and  the  ap- 
plication   was    refused.     After    B's    death,    plaintiff 
presented  his  claim  for  services. 

.  (8)  Boston  £ff  Maine  Ry.  v.  Bartlett,  3  Cush. 
(Mass.)  224.  Defendant  made  a  proposition  in 
writing  to  plaintiff  to  accept  a  certain  price  for  some 
land  if  taken  within  thirty  days.  Plaintiff  accepted 
the  proposition  before  the  thirty  days  expired.  De- 
fendant refused  to  deliver  a  deed. 

(9)  In  Holmes' *s  Appeal,  77  Pa.  St.  50,  a  party 
about  to  purchase  a  farm  asked  the  owner  whether 
the  neighborhood  was  sickly  or  not,  and  declined  to 
purchase  if  it  was.  The  owner  assured  him  that  it 
was  free  from  sickness,  whereas  fever  and  ague  were 


52  CASES   ON   CONTRACTS 

prevalent   in    the   locality.     What    are   the   buyer's 
rights  ? 

(10)  In  the  case  of  Earner  v.  Sidway,  124  N.  Y. 
538,  one  Story  promised  his  nephew,  William,  that 
if  he  would  refrain  from  drinking  liquor,  using  to- 
bacco, swearing,  and  playing  cards  or  billiards  for 
money  until  he  should  become  twenty-one  years  of 
age,  he  would  pay  him  $5000.  William  lived  up  to 
his  part  of  the  agreement  and  upon  becoming  of 
age  asked  his  uncle  for  payment. 


LESSON  XV 

(1)  In    Aller  v.  A  Her,  40  N.  J.    L.  446,  a  father 
gave  his  daughter  a  written  instrument  under  seal 
by  which  he  promised  to  pay  her  $312.     This  was 
understood  to  be  part  of  the  money  which  the  father 
had  owed  his  wife,  now  deceased,  and  he  felt  it  should 
go   to   the   daughter,    although   there   was   no   legal 
obligation.     The  defense  to  this  promise  was  want  of 
consideration. 

(2)  In  Baker   v.   Holt,    56  Wis.  100,  defendant  in 
Connecticut  wrote  to  plaintiff  in  Wisconsin,  offering 
to  sell  him  certain  land  at  a  stated  price  payable  at 
a  specified  time,  but  said  nothing  about  the  place  of 
payment  or  delivery  of  the  deed.     Plaintiff  replied 
that  he  would  take  the  land  upon  the  terms  men- 
tioned, and  added,  "  You  may  make  out  the  deed, 
leaving  the  name  of  the  grantee  blank,  and  forward 


CASES   ON  CONTRACTS  53 

the  same  to  L.  L.  Mosher  at  Grand  Rapids,  Wiscon- 
sin, or  to  your  agent,  if  you  have  one  here,  to  hand  to 
me  on  the  payment  of  $200  and  the  delivery  of  the 
necessary  security."  This  action  was  brought  upon 
defendant's  refusal  to  deliver  deed  as  directed. 

(3)  Graves    v.   Johnson,   156    Mass.    211,  was   an 
action  for  the  price  of  intoxicating  liquors,  sold  and 
delivered  by  plaintiff  in  Massachusetts  to  a  Maine 
hotel  keeper  with   a  view  of  their  being  resold  by 
defendant  in  Maine,  contrary  to  the  laws  of  that  state. 

(4)  Boston  Ice  Co.  v.  Potter,  123  Mass.  28,  was  an 
action  for  the  price  of  ice  furnished  to  defendant 
from  April  i,  1874,  to  April  i,  1875.     The  defendant 
was  supplied  with  ice  by  plaintiff  in  1873  and,  be- 
coming   dissatisfied,    terminated    his    contract    and 
made  a  new  one  with    the  Citizens  Ice  Company. 
Just  before  April,   1874,  this  company  sold  out  to 
plaintiff.     The  court  found  that  the  defendant  had 
no  notice  of  the  sale. 

(5)  Jones  v.  Edwards,   i  Neb.  170,  was  an  action 
brought  for  damages  because  of  alleged  fraud  in  the 
sale  of  a  horse.     Jones  bought  the  horse  when  he  had 
a  sweeny,  stiffness  in  the  neck,  and  other  ailments. 
He  cut  the  cords  of  his  neck  and  doctored  him  up. 
Later,  Edwards  came  and  wanted  to  buy  a  farm  team. 
Jones  said  he  had  what  he  wanted,  and  showed  him 
this  one  and  another  horse,  saying  they  were  sound, 
as  far  as  he  knew,  but  that  he  never  warranted  a 
horse.     He  did  not  say  a  word  as  to  the  former  ail- 
ments. 


54  CASES  ON  CONTRACTS 

(6)  Trustees  v.  Pratt,  93    111.  475,  was  an  action 
on   a   note   given   by  one   Pratt   to   the   trustees  of 
a    church    as    a    subscription    to    enable    them    to 
procure    a    bell.     Pratt    died    before    the    bell   was 
purchased. 

(7)  In     Thwing   v.    Hall,   40  Minn.   184,  plaintiff 
made  a  contract  to  sell  certain  timber  lands  to  de- 
fendant, thinking  they  contained  seven  million  feet 
of  fine  lumber,  defendant  also  believing  there  was 
good  lumber  there.     The  facts  were  that,  unknown 
to  either  party,  the  land  had  been  practically  stripped 
of  good  lumber.     Defendant  sent  a  man  who  mis- 
took the  location  and  reported  good  lumber. 

(8)  Bainbridge    v.  Firmstone,  .8  A.   &  E.    (Eng.) 
743,  was  a  case  in  which  defendant  obtained  plain- 
tiff's consent  to  let  him  weigh  two  boilers  belonging 
to  plaintiff  and  promised  to  place  them  back  in  the 
shape   in   which   he   found    them.      Defendant   took 
the  boilers  apart  and  weighed  them  and  then  refused 
to  put  them  together  again,  claiming  there  was  no 
consideration  for  his  promise  to  put  them  back. 

(9)  In   Dearborn  v.  Bowman,  3  Met.   (Mass.)  155, 
Bowman     was     nominated     for     senator.     Plaintiff 
rendered  services  and  furnished  literature  to  advance 
defendant's  cause,  but  without  any  solicitation  on 
defendant's    part.     After    the    election,    defendant 
gave  plaintiff  his  note  for  $60  for  such  services,  and 
this  action  was  brought  on  the  note. 

(10)  Kyle  v.  Kavanaugh,  103  Mass.  356,  was  an 
action  to  recover  for  the  purchase  price  of  land.     It 


CASES  ON  CONTRACTS  55 

transpired   that   the  defendant  was  negotiating   for 
one  piece  of  land  and  the  plaintiff  was  selling  another. 


LESSON  XVI 

(1)  In  the  case  of  Sloan  v.  McElveny  56  Ga.  208, 
Sloan  &  Co.  sued  McElven  Bros.,  on  a  promissory 
note  given  by  them,  the  consideration  for  which  was 
the  payment  of  a  note  against  their  father,  who  was 
dead.     Before  his  death  the  father  had  become  insol- 
vent and  had  gone  through  bankruptcy. 

(2)  In  Eaton    v.  Avery,  83    N.  Y.    31,  defendant 
made  false  representations  to  a  mercantile  agency 
as  to  the  financial  responsibility  of  his  firm  which 
asked  credit  of- plaintiff.     Plaintiff  went  to  the  mer- 
cantile agency  and  obtained  the  information  given 
by  defendant,  and  relying  on  this,  he  delivered  goods 
to  the  firm  on  credit.     This  action  was  brought  to 
set  aside  the  contract  of  sale  and  to  recover  the  goods. 

(3)  In    Flanagan  v.    Kilcome,    58  N.    H.  443,  de- 
fendant promised  to  pay  plaintiffs  a  certain  sum  if 
they  would  drop  a  lawsuit  which  they  had  commenced 
against  her.     This  was  done,  but  she  did  not  pay  the 
agreed  sum  and  suit  was  brought  to  recover  it. 

(4)  Gibson  v.  Pelkie^j  Mich.  380,  was  an  action 
for  value  of  services  on  an  agreement  concerning  a 
judgment  which  plaintiff  was  to  collect,  retaining  one 
half  for   his   remuneration.     It   transpired   that   no 
such  judgment  existed. 


56  CASES   ON   CONTRACTS 

(5)  In  Summers  v.  Faughan,  35  Ind.  323,  plaintiff 
sold  defendant  an  engine  and  machinery  and  took  a 
note  for  same.     This  action  was  to  recover  on  the 
note.     Defendant   claimed   that   after   the   sale    the 
plaintiff  had  warranted  the  machinery,  whereas  in 
fact  it  was  defective.     Is  the  plaintiff  liable  on  his 
warranty  ? 

(6)  In    McBratney    v.    Chandler,    22    Kan.    692, 
plaintiff  sued  for  services  in  presenting  the  claim  of 
the  Miami  Indians  at  Washington.     It  was  proved 
that  the  services  were  those  of  a  lobbyist,  and  de- 
fendant contended  they  were  illegal. 

(7)  Wolf  or  d  v.  Powers,  85  Ind.  294,  was  an  action 
on  a  note  given  in  consideration  of  a  parent  naming 
a  child  after  the  maker  of  the  note. 

(8)  In  Smith  v.  Hughes,  L.  R.  6  Q:  B.  (Eng.)  597, 
plaintiff  offered    to   sell    defendant  some  oats,  and 
showed  a  sample.     Defendant  wrote  the  next   day 
that  he  would  take  them  at  the  price  named.     He 
afterwards  refused  to  take  the  oats  on  the  ground 
that  they  were  new  oats  and  he  thought  he  was  buy- 
ing old  oats.     Nothing  had  been  said  at  the  time  of 
the  sale  about  their  being  old  oats,  but  the  price  was 
high  for  new  oats. 

(9)  Smith  v.  JEtna  Life  Insurance   Co.,  49  N.  Y. 
211,   was   an    action   upon    a   life   insurance   policy. 
The    defense    was    fraud    in    obtaining    it.     In    the 
physician's   examination   it  was   asked   whether  in- 
surer had  a  cough,  occasional  or  habitual  expectora- 
tion, or  difficulty  in   breathing.     The   answer  was, 


CASES   ON   CONTRACTS  57 

"  No  cough ;  walking  fast  upstairs  or  uphill  pro- 
duced difficulty  in  breathing."  The  facts  were  that 
he  had  raised  blood  for  two  and  one  half  years  and 
that  he  died  three  months  after  the  policy  was  issued. 
(10)  Bainbrigge  v.  Browne,  18  Ch.  Div.  (Eng.) 
1 88,  was  an  action  to  set  aside,  for  undue  influence, 
a  deed  given  by  children  who  were  of  age,  to  their 
father. 

LESSON  XVII 

(1)  In  Anderson   v.  May,  50  Minn.  280,   plaintiff 
contracted  in  March  to  raise  and  deliver  to  defendant 
591   bushels  of  beans.     Plaintiff  delivered  only  152 
bushels  because  most  of  his  crop  was  destroyed  by 
early  and  unusual  frost. 

(2)  Hall  v.  Perkins,  3   Wend.  (N.  Y.)  626,  was  a 
case  in  which  a  simple-minded,  ignorant  young  man 
was  induced  by  his  uncle,  a  justice  court  lawyer,  to 
accept   a  conveyance  of  land  worth   $240  in  satis- 
faction of  a  claim  of  $500.     The  uncle  was  one  of  the 
executors  of  the  estate  which  owed  plaintiff. 

(3)  In  Morrill  v.  Nightingale,   93   Cal.  452,  plain- 
tiff procured  several  promissory  notes  to  be  executed 
by    defendant    under    coercion     and     intimidation, 
caused  by  threats  of  arrest,  and  he  also  had  a  war- 
rant of  arrest  issued  by  a  justice  of  the  peace,  not 
for  the  purpose  of  punishing  defendant  for  a  crime, 
but  to  compel  him  to  pay  the  money  or  execute  the 
notes. 


58  CASES  ON  CONTRACTS 

(4)  Wood  v.  Steele,  6   Wall.   (U.  S.)  80,   was  an 
action  on  a  promissory  note  dated  October  n,  1858, 
and  made  by  Steele  and  Newson,  payable  to  their 
own  order  one  year  from  date.     It  was  indorsed  by 
them   to   Wood,   the   plaintiff.     "  September  "   had 
been  stricken  out  and  "  October  "  put  in  as  the  date. 
The  change  was  made  after  Steele  had  signed  the 
note  as  surety  and  without  his  knowledge  or  consent. 

(5)  In  Wolf  v.  Marsh,  54  Cal.  228,  Marsh  prom- 
ised in  writing  to  pay  Wolf  a  certain  sum  of  money. 
The  note  contained  the  following  condition  :    "  This 
note  is  made  with  the  express  understanding  that  if 
the  coal  mines  in  the  Marsh  Ranch  yield  no  profit 
to  me  this  note  is  not  to  be  paid  and  the  obligation 
herein   expressed   shall  be  null   and  void."     There- 
after,  and  before  the  mines  had  yielded  anything, 
defendant  sold  them. 

(6)  In   Parrish  v.  Thurston,  87  Ind.  437,  plaintiff 
sold  to  defendant  a  buggy  and  harness  and  received 
a  promissory  note  signed  "  E.  K.  Parrish."     There 
was  a  man  by  that  name  living  near  Shelbyville,  the 
place  where  the  sale  was  made,  who  was  wealthy  and 
was  known  to  both  parties.     The  note  was  really 
made  by  E.  K.  Parrish  of  Hamilton  County,  a  man 
entirely   unknown   to   plaintiff.     Plaintiff  supposed 
he  was  getting  a  note  signed  by  the  man  from  Shelby- 
ville, and  the  defendant  knew  that  plaintiff  believed 
this.     As  soon  as  the  plaintiff  learned  the  truth,  he 
tendered  back  the  note  and  sought  to  rescind  the 
contract. 


CASES  ON  CONTRACTS  59 

(7)  In  Blaskower  v.  Steel,   23    Ore.  106,  plaintiff, 
between  the  years  1878  and  1885,  sold  to  H  a  quan- 
tity of  cigars.     On  May  18,  1885,  there  was  a  credit 
on  the  account.     What  was  the  effect  on  the  various 
items  of  the  account  beginning  in  1878  ? 

(8)  Nolan  v.  Whitney,  88  N.  Y.  648,  was  an  action 
to  recover  on  a  contract  for  building  defendant  a 
house.      The    defense    was    nonperformance.      The 
court  found  that  defendant  had  endeavored  to  live 
up    to   the    agreement    and,    acting   in    good    faith, 
had  substantially  performed  his  part.     There  were 
some  defects  in  plastering  that  could  easily  be  reme- 
died. 

(9)  Bird  v.    Munroe,  66  Me.  337,  was    a  case  in 
which   a  verbal  contract  was  made.     The  contract 
belonged   to  the  class   required   by  the   Statute  of 
Frauds  to  be  in  writing.     It  was  broken,  and  the 
parties  afterward  entered  into  a  written  agreement 
containing  the   terms   of  the   oral   contract.     After 
the  writing  was  signed,  an   action  was  brought  for 
breach  of  the  contract  which   occurred   before  the 
written  agreement  was  executed. 

(10)  Hurley  v.  Brown,  98  Mass.  545,  was  an  action 
to  compel  defendants  to  perform  their  part  of  the 
following  contract  and  to  convey  the  land  to  plaintiff: 

#50  LYNN,  April  14,  1866. 

Received  of  John  and  Michael  Hurley  the  sum  of  fifty  dol- 
lars in  part  payment  of  a  house  and  lot  of  land  situated  on 
Amity  Street,  Lynn,  Mass.  The  full  amount  is  $1700.  This 
bargain  is  to  be  closed  within  ten  days  of  the  date  hereof. 


60  CASES   ON  CONTRACTS 

This  was  signed  by  the  parties.  The  defense 
claimed  that  the  writing  was  not  sufficient,  as  there 
were  several  houses  and  lots  on  the  street.  It  was 
shown  that  defendant  owned  no  other  house  and  lot 
on  the  same  street. 


LESSON  XVIII 

(1)  Kent  v.   Kent,  62  N.  Y.  560,  was  an  action  on 
an  oral  contract  whereby  plaintiff  agreed  to  work 
upon  K's  farm  and  to  receive  his  pay  after  K's  death. 
Plaintiff    entered    upon    such    employment,  and    K 
died  five  years  thereafter. 

(2)  In  McCormick  v.    Drummett,  9  Neb.  384,  Z,  a 
stepfather,  gave  D,  his  stepson,  the  use  of  his  farm 
during  Z's  lifetime  in  consideration  of  D's  supporting 
Z  and  his  wife  during  their  lives.     Defense  was  non- 
conformity with  the  requirements  of  the  Statute  of 
Frauds. 

(3)  In  Colly er  v.    Moulton,  9    R.   I.  90,  Moulton 
and   Bromley,   copartners,   entered   into   a   contract 
with  plaintiff  who  agreed  to  build  them  a  wire  bend- 
ing machine.     Moulton  and  Bromley  dissolved  part- 
nership and  Moulton  withdrew  from  the  firm,  after 
which  plaintiff  agreed  to  release  him  from  the  agree- 
ment   and    look    to    Bromley.     Subsequently    this 
action  was  brought  against  Moulton  on  the  original 
contract. 

(4)  In  Oddy  v.  James,    48  N.  Y.  685,   about  the 


CASES  ON  CONTRACTS  6 1 

middle  of  March  the  parties  thereto  entered  into  an 
oral  agreement  by  which  defendant  employed 
plaintiff  to  superintend  his  cement  works  for  one 
year  from  April  i  next.  Plaintiff  worked  until 
August  3,  when  defendant  discharged  him.  Plaintiff 
sued  and  defendant  set  up  that  the  agreement  was 
void  under  the  Statute  of  Frauds. 

(5)  In  Woodberry  v.    Warner,   53  Ark.  488,  Wood- 
berry,  the  owner  of  a  steamboat,  employed  Warner, 
a  pilot,  at  a  salary  of  $720  per  year,  with  the  further 
agreement  that  as  soon  as  the  net  earnings  of  the 
boat  should  amount  to  $8000  he  should  become  owner 
of  a  one-fourth  interest.     In  about  two  years,  before 
the  earnings   amounted   to   $8000,  Woodberry  sold 
the  boat. 

(6)  In  Boston  v.  Farr,   148   Pa.  St.  220,  plaintiff, 
a   physician,    brought   suit   to    recover   for   services 
rendered    defendant's   stepson.     Defendant   said   to 
plaintiff,  "  Go  and  get  a  surgeon  and  do  all  you  can 
for  the  boy ;   I  will  see  that  you  get  your  pay."     Did 
this  case  come  within  the  Statute  of  Frauds  ? 

(7)  In  Owen  v.  Hall,  70  Md.  97,  at  the  maturity 
of  a  joint  promissory  note  a  joint  renewal  note  was 
given  by  three  makers.     After   Hall  had  signed  as 
maker,  the  other  two  makers  added  the  words  "with 
interest  "  to  the    note  without    Hall's    knowledge 
or  consent. 

(8)  Richardson  v.    Robbins,   124  Mass.  105,  was  a 
case  in  which  B  agreed  to  give  a  mortgage  to  plaintiff, 
and  the  defendant  agreed  orally  to  pay  the  plaintiff 


62  CASES  ON  CONTRACTS 

such  portions  of  the  mortgage  and  notes  as  B  should 
fail  to  pay. 

(9)  Windmuller  v.  Pope,    107  N.    Y.  674,  was  an 
action  to  recover  damages  for  breach  of  contract. 
The  parties  entered  into  a  contract  whereby  plaintiff 
sold  to  defendant  1200  tons  of  old  iron  to  be  delivered 
at  a  certain  time.     Before  the  time  expired  defendant 
notified  plaintiff  that  he  would  neither  receive  nor 
pay  for  any  of  the  iron.     Plaintiff  thereupon   sold 
the  iron  elsewhere  and  brought  this  action. 

(10)  In  Brown  v.  Foster,  113  Mass.  136,  plaintiff 
expressly  agreed  to  make  a  suit  of  clothes  for  defend- 
ant that  would  be  satisfactory  to  him.     The  clothes 
were  made  and  delivered,  but  defendant  declined  to 
accept  them.     Plaintiff  proved  that  they  could  easily 
be  altered  and  made  to  fit. 

(i  i)  In  Smithwick  v.  Shepherd,  4  Jones  (N.  C.),  196, 
Shepherd,  who  owed  plaintiff  for  board,  died.  De- 
fendant, his  administrator,  in  a  conversation'  with 
plaintiff  stated  that  "  he  would  see  it  paid/'  or,  "  it 
should  be  paid."  Can  plaintiff  recover  ? 


LESSON  XIX 
PROPERTY 

36.  PROPERTY  IN  GENERAL. 

37.  PERSONALTY  AND  REALTY  DISTINGUISHED. 

38.  FIXTURES. 

36.  Property  in  General.  -  -  There  are  two  con- 
ceptions of  the  term  property.  One  is  the  popular 
idea  that  material  things  are  property;  the  other  is 
the  legal  idea  that  the  ownership  of  the  material 
thing  is  the  property  interest  in  it.  For  our  purposes 
we  may  define  property  to  be  the  control  which  may 
be  legally  exercised  over  a  thing  having  value,  by  a 
party  called  the  owner.  Property  may  be  acquired 
in  four  ways  :  by  taking  possession  of  things  free  in 
nature;  by  purchase  ;  by  inheritance;  and  by  finding, 
in  cases  where  no  owner  of  the  lost  property  is  found. 
One  who  shoots  wild  game  becomes  the  owner  of 
such  game  by  the  first  method  of  acquiring  property. 
He  takes  possession  of  that  which  was  existing  free 
in  nature.  One  who  purchases  the  right  to  the  use 
of  a  thing  secures  a  property  interest  by  the  second 
method  of  acquisition.  One  who  is  given  a  thing  is 
said  also  to  secure  his  property  interest  in  the  same 
manner.  When  property  rights  are  handed  down 

63 


64  PROPERTY 

from  one  person  to  another  by  will,  or  according  to 
the  laws  of  inheritance,  the  property  is  acquired  by 
the  third  method. 

There  are  two  distinct  kinds  of  property,  personal 
and  real.  In  connection  with  both  realty  and  per- 
sonalty there  are  two  kinds  of  property  interests, 
absolute  and  special.  The  owner  of  property  has  an 
absolute  right  in  it.  One  who  rents,  borrows,  or  in 
any  other  way  comes  into  possession  of  property  for 
some  particular  use,  has  only  a  special  property 
interest.  His  rights  may  be  exercised  to  the  exclu- 
sion of  every  one  else  except  the  owner,  who  must  on 
his  part  respect  the  special  property  rights  of  the 
other. 

37.  Personalty  and  Realty  Distinguished.  —  Real 
property  has  been  defined  as  land  and  its  appurte- 
nances. It  is  very  difficult  to  define  personalty,  and 
no  better  idea  of  this  class  of  property  can  be  ob- 
tained than  by  considering  as  personal  property  all 
things  not  included  under  the  head  of  realty.  Per- 
sonal property  has  been  defined  as  that  which  may  be 
moved  from  place  to  place.  This  definition  is  faulty 
inasmuch  as  houses,  fences,  wind-mills,  barns,  and 
even  sod,  earth,  and  stone  may  be  moved.  All  these 
things  while  appurtenant  to  the  land  are  considered 
realty,  but  when  separated  from  the  land  may  be 
considered  personal  property.  Land  and  all  things 
attached  to  it  in  a  permanent  way  and  intended  for 
use  in  connection  with  the  land  may  safely  be  classi- 
fied as  realty,  while  those  things  which  may  and  do 


PROPERTY  65 

generally  attend  the  person  of  the  owner,  and  are 
not  intended  for  use  in  connection  with  land,  may  be 
classified  under  the  head  of  personalty. 

38.  Fixtures.  —  There  is  a  class  of  things  known 
as  fixtures  the  exact  nature  of  which  varies  according 
to  conditions.  Fixtures  include  all  those  things 
which  are  attached  to  realty  to  be  used  in  connection 
with  it,  but  the  permanency  of  which  is  left  to  be 
determined  by  the  conditions  under  which  the  prop- 
erty is  used.  For  example,  A  rents  a  room  of  B  to 
use  as  a  store,  The  tenant  A  puts  in  counters,  show- 
cases, shelves,  etc.,  to  be  used  in  carrying  on  his 
particular  business.  While  these  things  are  attached 
to  the  realty  and  used  in  connection  with  it,  they 
are  more  intimately  associated  with  the  particular 
business  gf  the  tenant  and  are  called  fixtures. 
Whether  they  belong  to  the  tenant  as  personal  prop- 
erty and  can  be  removed  by  him,  or  whether  tney 
belong  to  the  owner  as  permanent  additions  to  the 
realty,  will  depend  upon  the  intention  of  the  parties 
in  each  case.  From  the  definition,  it  is  evident  that 
fixtures  can  be  called  neither  real  nor  personal  until 
the  conditions  under  which  they  are  used  are  fully 
understood. 

As  a  general  proposition  it  may  be  stated  that 
whether  or  not  things  used  in  connection  with  realty, 
and  known  as  fixtures,  are  a  part  of  the  realty,  or 
are  personalty,  depends  upon  the  intention  of  the 
parties  in  any  given  case.  When  the  intention  is 
made  clear  by  a  written  contract,  there  can  be  no 


66  PROPERTY 

question  as  to  the  classification  of  the  fixtures ;  but 
when,  as  is  more  often  the  case,  the  fixtures  are  added 
to  the  realty  without  any  definite  contract  between 
the  owner  of  the  realty  and  the  one  making  the  .im- 
provements, it  becomes  a  difficult  matter  to  deter- 
mine what  should  become  of  the  improvements  so 
made  at  the  expiration  of  the  relation  existing  be- 
tween the  two  parties. 

Formerly,  the  intention  was  determined  very 
largely  by  the  manner  in  which  the  fixtures  were 
attached  to  the  realty.  It  was  arbitrarily  held  that 
when  shelves,  counters,  or  any  other  kind  of  mercan- 
tile fixtures  were  attached  to  the  realty  by  the  use  of 
nails,  they  were  thereby  made  a  part  of  the  realty. 
When  such  fixtures  were  attached  by  means  of  screws, 
it  was  regularly  held  that  they  were  considered  per- 
sonalty and  would  remain  the  property  of  the  one 
attaching  them  as  against  the  claim  of  the  owner  of 
the  realty.  At  present  there  are  three  factors  that 
are  taken  into  consideration  in  settling  this  question  : 
First,  method  of  attachment ;  second,  relation  be- 
tween the  parties ;  third,  the  use  to  which  the  fix- 
tures are  put. 

The  method  of  attachment  at  the  present  time  is 
not  conclusive  as  to  the  intention,  but  merely  evi- 
dence tending  to  show  what  was  in  the  mind  of  the 
one  attaching  the  fixtures  when  the  work  was  done. 
For  example,  when  the  relation  of  the  parties  is  that 
of  the  landlord  and  tenant  and  the  tenant  attaches 
the  fixtures  to  the  realty,  it  is  ridiculous  to  suppose 


PROPERTY  67 

that  it  was  his  intention  to  make  a  permanent  im- 
provement to  the  realty  of  his  landlord,  even  though 
the  fixtures  were  nailed  to  the  wall.  The  use  that 
is  to  be  made  of  the  fixtures  further  strengthens  the 
inference  from  the  relation  of  the  parties,  that  it  is 
the  intention  of  the  tenant  to  remove  those  fixtures 
at  the  expiration  of  his  lease. 

When  the  relation  between  the  parties  is  that  of 
mortgagor  and  mortgagee  and  the  fixtures  are  at- 
tached by  the  mortgagor,  it  is  reasonably  to  be  ex- 
pected that  he  intended  to  make  those  fixtures  a 
permanent  part  of  the  realty  and  the  mortgagee  may 
rightfully  claim  them  as  a  part  of  the  property  on 
which  he  holds  his  mortgage. 

When  the  relation  between  the  parties  is  that  of 
buyer  and  seller,  it  is  not  quite  so  clear  what  is  the 
intention  of  the  seller  as  to  fixtures  used  in  connection 
with  the  realty.  As  a  general  rule,  it  would  be  safe 
to  assume  that  he  intended  such  fixtures  to  become 
permanent  parts  of  the  realty.  Conditions  might 
tend  to  overcome  this  inference.  It  should  be  stated 
in  this  connection,  that  the  purchaser  of  the  realty 
should  be  careful  to  require  that  his  contract  of  sale 
includes  all  those  fixtures  that  may  be  easily  removed 
by  the  seller  before  delivery.  This  is  the  only  safe 
method  to  follow  in  buying  realty  where  fixtures 
are  concerned. 

The  tenant  must  remove  fixtures  before  the  term 
of  his  lease  expires  ;  otherwise,  he  may  be  considered 
a  trespasser  in  attempting  to  remove  them  from 


68  CASES  ON  FIXTURES 

property  over  which   he   had   ceased   to   have   any 
control. 

LESSON  XX 

39.   CASES  ON  FIXTURES 

(1)  InHinckleylron  Co.  v.  Black,  70  Me.  473,  plain- 
tiffs entered  into  possession  of  a  tract  of  land  under  a 
contract  with  Black,  the  owner,  for  its  purchase,  and 
erected  large  and  substantial  buildings  with  engines 
and    machinery    for    manufacturing    an    extract    of 
bark  for  tanning  purposes.     Plaintiffs  failed  to  pay 
for  the  land,  so  never  acquired  title.     This  action 
was  brought  for  the  value  of  the  improvements. 

(2)  Hendy  v.  Dinkerhoff,  57  Cal.  3,  was  an  action 
to  recover  possession  of  a  steam  engine  and  boiler. 
One  Lampson  was  in  possession  of  land  under  a  con- 
tract to  purchase  from  defendant,  the  contract  pro- 
viding that  in  case  of  failure  to  purchase,  all  tools 
should  belong  to  defendant.     Plaintiff  later  leased  an 
engine  and  boiler  to  Lampson,  and  the  agreement  was 
that  if  Lampson  failed  to  pay,  plaintiff  might  retake 
them.     The  engine  was  built  into  the  masonry  so 
that  it  could  not  be  .removed  without  destroying  the 
masonry  and  the  wall  to  which  it  was  affixed. 

(3)  In   McRea  v.    Central   Bank,  66  N.   Y.   489, 
plaintiff  as   mortgagee  claimed  the  machinery  in   a 
building  erected  expressly  for  use  as  a  twine  factory. 
The  machinery  was  heavy  and  was  fastened  to  the 
floor  by  bolts,  nails,  and  cleats  and  was  attached  to 


CASES  ON  FIXTURES  69 

the  gearing.  Most  of  the  machinery  could  have  been 
removed  without  material  injury  to  the  building  and 
used  elsewhere.  It  was  proved  that  the  machinery 
was  put  in  the  building  for  permanent  use. 

(4)  Snedeker  v.  Warring,  12  N.  Y.  170,  was  a  case 
in  which  the  owner  of  realty,  after  giving  a  mortgage, 
placed  on  his  ground  in  front  of  his  house  a  statue  of 
Washington,  made  by  himself,   and  weighing  about 
three  tons.     It  was  on  a  base  three  feet  high  which 
rested  upon  a  foundation  built  of  mortar  and  stone. 
It  was  not  fastened  to  the  base,  nor  the  base  to  the 
foundation.     Did  the  mortgage  cover  the  statue  ? 

(5)  Rogers  v.  Crow,  40  Mo.  91,  was  a  case  where 
the  builders  of  a  church  left  a  recess  in  which  an  or- 
gan was  to  be  placed.     The  organ  was  required  to 
complete  the  design  and  finish  of  the  building  and 
was  attached  to  the  floor  and  intended  to  be  perma- 
nent.    Did  the  organ  belong  to  the  realty  ? 

(6)  In  Dostal  v.  McCaddon,  35  Iowa,  318,  defend- 
ant after  his  lease  had  expired  entered  upon  plain- 
tiff's premises  to  remove  a  vault  and  safe  he  had  con- 
structed,  and   this   action  was   brought  to   restrain 
him  from  removing  them. 

(7)  In    Smith    v.    Whitney,    147    Mass.    479,    the 
tenant's  lease  provided  that  he  might  erect  buildings 
for  manufacturing  purposes  and  remove  them  within 
the  limit  of  his  lease.     He  erected   a  brick  engine 
house   complete   in    itself.     The    engine    and    boiler 
were  on  a  solid  foundation  of  masonry.     Could  the 
tenant  remove  building,  engine,  and  boiler  ? 


LESSON  XXI 

CONTRACTS  FOR  THE   SALE  OF   PERSONAL 
PROPERTY 

40.  SALE,  BARTER,  AND  BAILMENT. 

41.  CONTRACT  TO  SELL  AND  CONTRACT 

OF  BARGAIN  AND  SALE. 

42.  How  MADE. 

40.  Sale,  Barter,  and  Bailment. -- Three  impor- 
tant contracts  often  made  in  reference  to  personal 
property  are  contracts  of  bargain  and  sale,  barter, 
and  bailment.  A  contract  of  bargain  and  sale  is 
one  which  transfers  the  title  to  personal  property  in 
exchange  for  the  purchase  price  in  the  form  of 
money  or  its  equivalent. 

A  contract  of  barter  is  an  exchange  of  one  kind  of 
personal  property  for  another. 

A  bailment  contract  provides  for  the  transfer  of 
the  possession  of  personal  property  by  the  owner,  or 
one  having  the  rightful  possession  of  it,  to  a  second 
party  for  some  specific  purpose  upon  the  condition 
that  it  shall  be  returned  or  redelivered  by  the  second 
party  upon  the  completion  of  the  purpose  for  which 
the  bailment  was  created.  Ordinarily,  property  so 

•  70 


SALES   OF   PERSONAL   PROPERTY  71 

transferred  is  returned  to  the  party  giving  it  in  ex- 
actly the  same  condition  in  which  it  was  received, 
except  for  the  usual  wear  and  tear  incident  to  its 
use  in  accordance  with  the  bailment  contract.  How- 
ever, it  sometimes  happens  that  the  identical  thing 
is  returned  in  slightly  different  form.  This  does  not 
destroy  the  nature  of  the  contract.  It  is  a  bailment 
if  it  can  be  shown  that  the  parties  so  intended  it. 
For  example,  A  takes  fifty  bushels  of  wheat  to  the 
mill  and  receives  from  the  miller  the  flour,  bran,  and 
middlings  made  from  his  wheat.  This  is  a  bailment 
in  which  the  property  is  returned  in  a  different  form 
from  that  in  which  it  was  received ;  being  the  iden- 
tical property,  however,  it  cannot  be  classified  as  a 
sale  or  barter. 

It  is  also  held  that  a  bailment  relation  is  created 
when  a  party  delivers  grain  to  a  warehouseman  who 
is  to  store  it  for  him  and  return  an  equal  number  of 
bushels  of  the  same  quality  of  grain  at  a  time  agreed 
upon  by  the  parties.  While  the  identical  grain  is  not 
returned,  other  grain  exactly  like  that  which  was 
delivered  to  the  warehouseman  is  returned  to  the 
owner. 

41.  Contract  to  Sell  and  Contract  of  Bargain  and 
Sale.  —  Sale  contracts  are  usually  referred  to  as 
either  executory  or  executed.  Since  an  executory 
contract  of  sale  is  in  reality  no  sale  at  all  but  merely 
an  agreement  to  sell,  it  is  preferable  to  consider  such 
an  agreement  as  a  contract  to  sell  instead  of  an  actual 
sale. 


72  SALES  OF  PERSONAL  PROPERTY 

An  executed  sale  contract  is  one  in  which  it  is  the 
intention  of  both  parties  that  the  title  shall  pass  im- 
mediately, even  though  certain  terms  of  the  contract 
are  yet  to  be  fulfilled.  This  we  call  a  contract  of 
bargain  and  sale.  In  general  only  one  who  has  title 
to  property  can  sell  it  and  give  a  good  title.  Excep- 
tions to  this  general  rule  are  found  in  the  case  of  com- 
mission merchants  and  pledgees.  It  is  the  custom 
for  owners  of  certain  kinds  of  goods  to  ship  them  to 
commission  merchants  to  be  sold  without  qualifica- 
tions as  to  price  or  terms  of  sale.  This  custom  has 
become  so  thoroughly  fixed  that?  the  law  will  not 
permit  an  innocent  purchaser  from  a  commission 
merchant  to  suffer  loss  by  reason  of  secret  instruc- 
tions given  by  the  owner  to  the  merchant.  For 
example,  A  ships  a  carload  of  melons  to  B,  a  commis- 
sion merchant,  with  instructions  not  to  sell  them  for 
less  than  twenty  cents  each.  B  does  contract  to  sell 
these  melons  to  X  at  eighteen  cents  each.  A  cannot 
recover  the  melons  on  the  ground  that  they  have 
been  sold  contrary  to  his  instructions.  Title  given 
by  B  to  X  is  good,  even  though  it  was  given  in  viola- 
tion of  specific  instructions. 

A  pledgee  is  one  to  whom  personal  property  has 
been  given  as  security  for  the  payment  of  a  debt  or 
the  performance  of  some  other  obligation.  A  pledgee 
may  sell  the  property  at  the  expiration  of  the  pledge 
period,  provided  the  pledger  has  failed  to  perform 
his  obligation,  and  give  a  good  title  although  at  the 
time  he  sells  he  has  no  absolute  title  himself.  This 


SALES  OF   PERSONAL  PROPERTY  73 

power  to  sell  may  be  secured  to  the  pledgee  by  the 
terms  of  his  contract  with  the  pledger,  or  may  be 
implied  from  the  circumstances  of  the  transaction. 

42.  How  Made.  —  In  general  it  may  be  said  that 
no  restrictions  are  made  in  the  matter  of  'making 
contracts  for  the  sale  of  personal  property.  The 
seventeenth  section  of  the  Statute  of  Frauds  re- 
quires that  certain  formalities  be  complied  with  in 
order  to  enable  one  to  bring  an  action  in  a  court  of 
law  to  enforce  a  contract  to  sell.  It  should  be  re- 
membered that  when  these  formalities  are  not  com- 
plied with,  the  contract  is  not  necessarily  void,  but  it 
cannot  be  the  subject  of  an  action  at  law.  It  may 
be  thought  at  first  that  this  is  the  same  in  effect  as 
rendering  it  void,  but  it  will  be  seen  that  such  is  not 
the  case.  If  it  were  made  void,  no  subsequent  act 
could  give  it  validity,  but  under  the  present  law  the 
lack  of  necessary  formality  may  be  corrected  by 
subsequent  acts  of  the  parties.  Part  payment,  or 
part  delivery,  or  a  note  or  memorandum  may  be 
made  after  the  contract  has  been  entered  into. 


LESSON  XXII 

SALES  —  CONTINUED 
43.  SALE  OF  GOODS  ACT. 

43.  Seventeenth  Section  of  the  Statute  of  Frauds. 
-  This  English  statute  provides  : 


74  SALES  OF   PERSONAL   PROPERTY 

"  No  contract  for  the  sale  of  goods,  wares, 
and  merchandise,  for  the  price  of  ten  pounds 
sterling,  or  upwards,  shall  be  allowed  to  be 
good  except 

1.  The  buyer  shall  accept  part  of  the  goods 
so  sold,  and  actually  receive  the  same ;   or 

2.  Give  something  in   earnest  to  bind  the 
bargain,  or  in  part  payment ;    or 

3.  That  some  note  or  memorandum  in  writ- 
ing of  the  said  bargain  be  made  and  signed 
by  the  party  to  be  charged  by  such  contract 
or  his  agent  thereunto  lawfully  authorized." 

This  section  has  been  reenacted  in  most  of  the 
states.  The  amount  involved  necessary  to  bring  the 
contract  within  the  statute  varies  in  the  different 
states,  from  $30  to  $200.  As  will  be  seen,  the  statute 
includes  most  of  the  articles  regarded  as  personal 
property  under  the  terms  "  goods,  wares,  and  mer- 
chandise." A  close  question  comes  up  when  the 
goods  are  in  process  of  manufacture.  If  it  is  held 
that  it  is  a  sale  of  labor  and  of  material  to  be  made 
up,  it  is  not  a  sale  of  goods,  wares,  and  merchandise, 
but  a  contract  for  "  services,  skill,  and  materials," 
and  does  not  come  within  the  statute. 

English  Rule.— -The  English  rule  for  determining 
whether  a  given  contract  is  for  "  goods,  wares,  and 
merchandise  "  or  for  "  services,  materials,  and  skill  " 
is  that  if  the  thing  contracted  for  in  its  deliverable 
shape  could  be  properly  classified  as  "  goods,  wares. 


SALES   OF   PERSONAL   PROPERTY  75 

and  merchandise,"  then  the  contract  comes  under  the 
statute. 

Massachusetts  Rule.  -  -  The  Massachusetts  rule 
for  determining  whether  a  contract  to  s%ell  exists 
under  the  statute  or  not,  is  that  if  the  goods  to  be 
delivered  are  of  the  kind  regularly  manufactured  by 
the  seller,  the  contract  comes  under  the  statute,  but 
if  the  goods  manufactured  are  made  after  specifica- 
tions that  peculiarly  fit  them  for  the  uses  of  the  buyer, 
the  contract  does  not  'come  under  the  statute.  In 
all  other  respects  the  Massachusetts  rule  is  the  same 
as  the  English  rule. 

New  York  Rule.  —  Until  1911  there  was  another 
rule,  known  as  the  New  York  rule,  which  provided 
that  contracts  for  articles  to  be  manufactured  did 
not  come  under  the  statute,  but  that  if  the  thing 
contracted  for  was  in  existence  at  the  time  the  con- 
tract was  made,  the  contract  was  for  the  sale  of 
"  goods,  wares,  and  merchandise,"  even  though  im- 
portant work  remained  to  be  done  upon  the  thing 
sold.  This  rule  has  been  changed  by  statute  in 
New  York.  Several  states  have  followed  the  New 
York  rule,  and  properly  to  understand  the  law  in 
these  states  it  is  necessary  to  explain  the  former  New 
York  rule.  The  present  New  York  rule  corresponds 
with  that  of  Massachusetts. 

For  ordinary  purposes,  "  goods,  wares,  and  mer- 
chandise "  may  be  considered  to  include  all  kinds  of 
persorial  property. 

Natural  products  of  the  soil  such  as  trees  are  con- 


76  SALES  OF   PERSONAL   PROPERTY 

sidered  real  property,  and  come  under  the  seventeenth 
section  of  the  Statute  of  Frauds  only  when  they  are 
to  be  severed  from  the  soil  by  the  seller.  If  they 
are  to  be,  severed  by  the  buyer  they  come  under  the 
fourth  section  of  the  Statute  of  Frauds  as  they  are 
considered  an  interest  in  or  concerning  real  property. 

It  should  be  understood  that  the  seventeenth  sec- 
tion of  the  Statute  of  Frauds  does  not  absolutely  re- 
quire that  the  contract  to  sell  be  in  writing.  When  a 
partial  or  complete  delivery  has  been  made,  or  when 
a  partial  or  full  payment  has  been  accepted,  no 
writing  is  necessary.  When  there  has  been  neither 
payment  nor  delivery,  it  is  only  necessary  that  there 
be  some  written  memorandum  tending  to  show  that 
a  contract  to  sell  was  entered  into.  This  memoran- 
dum must  be  signed  by  the  party  against  whom  an 
action  is  brought,  and  must  give  such  informa- 
tion regarding  the  contract  that  there  can  be  no 
question  as  to  its  existence  and  terms.  For  ex- 
ample, A  and  B  enter  into  an  oral  contract  whereby 
A  contracts  to  sell  a  horse  to  B  for  $150.  Later  A 
writes  B  asking  him  to  confirm  their  oral  contract. 
B  in  reply  writes  a  letter  in  which  he  states  that  he  has 
bought  the  horse  of  A  for  $150.  This  letter  will  be 
a  sufficient  note  or  memorandum  to  satisfy  the 
Statute  of  Frauds. 

To  satisfy  the  requirement  that  a  part  or  all  of 
the  goods  should  be  delivered,  the  goods  must  be 
actually  accepted  by  the  buyer  in  conformity  with 
the  terms  of  the  contract.  A  buyer  who  has  ac- 


SALES  OF   PERSONAL   PROPERTY  77 

cepted  the  goods  for  the  purpose  of  examining  them 
cannot  be  deemed  to  have  accepted  them  within  the 
meaning  of  the  statute.  After  he  has  examined  them 
and  either  signified  his  approval  or  permitted  a 
reasonable  time  to  elapse,  he  is  said  to  have  accepted 
the  goods  and  a  legal  delivery  has  taken  place. 
Delivery  of  specific  goods  to  an  agent  designated  by 
the  buyer  is  sufficient. 

There  is  sometimes  what  is  known  as  a  constructive 
delivery  of  the  goods.  For  example,  A  sells  to  B  a 
thousand  bushels  of  wheat  which  he  has  stored  in  a 
certain  warehouse.  A  constructive  delivery  takes 
place  when  A  hands  B  the  key  to  the  warehouse,  or 
delivers  a  warehouse  receipt. 

Earnest  money  is  a  payment  which  is  made  to  bind 
the  bargain  but  which  is  not  considered  a  part  of  the 
purchase  price.  A  part  payment  may  be  made  at 
the  time  the  contract  is  entered  into,  or  subsequently. 
It  may  even  consist  of  canceling  an  old  indebtedness. 
Earnest  money  is  rarely  given  at  the  present  time. 
When  any  amount  is  advanced,  it  is  understood  to  be 
a  part  of  the  purchase  price,  unless  there  is  a  definite 
agreement  to  the  contrary. 


78  SALES   OF   PERSONAL   PROPERTY 

LESSON  XXIII 
SALES  —  CONTINUED 

44.  POTENTIAL  EXISTENCE. 

45.  PASSING  OF  TITLE. 

44.  Potential   Existence.  —  Only  things  that   are 
in  existence  at  the  time  of  making  the  contract  can 
be  the  subject  matter  of  a  sale.     There  is  an  apparent 
exception  to  this  rule  in  the  case  of  property  not  yet 
in   actual   existence   but   having  what  is   known   as 
potential   existence.     Things   that   are   in   potential 
existence  may  be  dealt  with   as   though  they  were 
in   actual  existence  at  the  time  of  entering  into  a 
contract  concerning  them. 

Things  are  in  potential  existence  when  they  will 
come  into  being  without  human  aid.  For  example,  a 
wheat  crop  growing  in  the  field  is  in  potential  exist- 
ence, because  if  left  alone  it  will  mature  in  due  time. 
A  crop  not  yet  planted  cannot  be  said  to  be  in 
potential  existence,  because  human  agency  is  required 
to  bring  it  into  being.  A  growing  crop  may  be  the 
subject  of  sale  or  mortgage,  but  an  unplanted  crop 
may  not  be  sold  or  mortgaged. 

45.  Passing  of  Title.  —  One  of  the  important  ques- 
tions in  connection  with  the  sale  of  personal  property 
is  the  question  of  when  the  title  to  the  property  actu- 
ally passes  from  the  seller  to  the  buyer.     When  prop- 
erty is  destroyed  between  the  time  of  entering  into 


SALES  OF   PERSONAL   PROPERTY  79 

the  contract  and  the  time  of  delivering  the  property, 
the  question  of  passing  of  title  becomes  important 
as  it  determines  upon  whom  the  loss  will  fall.  As  a 
general  rule  it  may  be  stated  that  the  title  will  pass  at 
the  time  when  it  is  intended  by  both  parties  to  the 
transaction  that  it  shall  pass.  It  is  sometimes 
difficult  to  determine  just  what  the  intention  of  the 
parties  is. 

When  the  contract  is  a'  bargain  and  sale  of  specific 
property,  the  title  passes  at  the  time  the  contract  is 
made.  As  a  contract  to  sell  is  merely  a  promise  to 
sell  at  a  later  date,  the  title  does  not  pass  until  an 
actual  sale  is  made. 

When  the  contract  is  for  the  sale  of  specific  goods 
and  the  seller^  according  to  the  contract,  is  required 
to  do  something  to  the  goods  in  order  to  prepare  them 
for  delivery,  the  title  does  not  pass  until  the  seller 
has  performed  his  task.  This  rule  will  be  followed, 
unless  it  appears  from  satisfactory  evidence  that 
there  was  a  different  intention  in  the  minds  of  both 
parties. 

When  specific  goods  are  sold,  and  it  is  agreed  that 
they  are  to  be  measured  or  weighed  by  the  seller 
before  delivery  for  the  purpose  of  determining  what 
the  price  shall  be,  the  title  does  not  pass  until  the 
goods  have  been  weighed  or  measured  irt  accordance 
with  the'agreement.  In  many  states  it  is  also  held 
that  if  the  act  of  weighing,  etc.,  is  to  be  performed  by 
the  buyer  the  same  rule  will  apply.  In  New  York 
state  title  passes  immediately  in  either  case. 


8o  SALES  OF   PERSONAL  PROPERTY 

It  is  sometimes  provided  in  the  contract  of  sale 
that  the  title  shall  not  pass  until  the  price  agreed 
upon  is  paid.  Such  payment  or  a  satisfactory  ar- 
rangement regarding  future  payment  is  usually  a 
condition  precedent  to  the  passing  of  title.  This 
condition  may  exist  even  in  cases  where  the  goods 
are  delivered  at  the  time  the  contract  is  made.  An 
illustration  is  found  in  installment  sales.  When 
goods  are  sold  on  the  installment  plan,  they  are  de- 
livered to  the  buyer,  but  it  is  expressly  agreed  that 
the  title  shall  not  pass  until  final  payment  has  been 
made. 

Goods  are  sometimes  sold  on  approval,  and  in  such 
cases,  unless  it  is  provided  otherwise,  the  title  passes 
when  the  buyer  has  communicated  his  approval  to 
the  seller,  or  at  the  expiration  of  the  time  agreed  upon 
by  the  parties ;  or,  in  the  event  of  no  agreement 
regarding  the  time,  at  the  expiration  of  a  reason- 
able time. 

In  some  cases  goods  are  sold  with  the  understand- 
ing that  they  are  to  become  the  property  of  the  buyer 
at  once,  but  that  he  shall  have  the  privilege  of  return- 
ing them  at  a  stated  future  time  if  he  desires  to  do  so. 
In  such  cases  the  title  passes,  but  reverts  to  the  seller 
if  the  buyer  chooses  to  exercise  his  right  of  return. 

We  have  been  discussing  the  passing  of  title  in 
contracts  for  the  sale  of  specific  goods.  We  shall 
now  consider  the  question  of  transfer  of  title  in  sales 
of  goods  that  are  not  specific. 

Unless  a  different  intention  is  shown  to  exist,  it 


SALES  OF   PERSONAL  PROPERTY  8 1 

will  be  understood  that  in  the  sale  of  goods  not  yet 
identified  the  title  shall  not  pass  until  identification 
is  made. 

When  the  'contract  is  for  the  sale  of  unidentified 
property  of  a  kind  where  the  value  of  each  unit  is 
not  uniform,  there  is  no  passing  of  title  until  definite 
identification  is  made.  For  example,  A  buys  ten 
cows  out  of  a  herd  of  twenty  and  agrees  to  come  for 
them  the  following  day.  There  is  no  passing  of  title 
until  selection  of  the  ten  is  made.  If  at  the  time  the 
contract  was  entered  into  A  had  placed  his  mark  on 
each  of  ten  cows,  the  title  to  each  of  these  ten  would 
pass,  notwithstanding  the  fact  that  they  were  left  in 
the  possession  of  the  seller. 

It  is  generally  held  that  in  the  sale  of  a  part  of  a 
quantity  of  goods,  where  the  value  of  each  unit  is 
the  same,  the  title  will  pass  unless  it  is  provided  other- 
wise before  an  actual  selection  of  the  goods  is  made. 
For  example,  A  buys  fifty  bushels  of  wheat  of  B  and 
it  is  agreed  that  on  the  following  day  fifty  bushels 
will  be  taken  from  a  bin  containing  one  thousand 
bushels  of  uniform  grade.  In  this  case  the  title 
passes  immediately  unless  there  is  convincing  evi- 
dence of  a  contrary  intention. 

In  the  case  of  goods  in  which  the  value  of  different 
units  varies,  an  appropriation  of  any  unit  to  the 
purposes  of  the  contract  can  only  be  made  by  a  selec- 
tion that  meets  the  approval  of  both  buyer  and 
seller,  unless  the  selection  of  the  unit  has  been  left 
to  one  party  by  agreement. 


82  SALES   OF   PERSONAL   PROPERTY 

An  appropriation  is  said  to  be  complete  when  the 
party  having  authority  to  select  performs  some  act  in 
connection  with  the  goods  which  would  be  improper 
until  the  actual  appropriation  had  'been  made. 
When  the  seller  turns  over  the  goods  to  a  carrier  to 
be  delivered  to  the  buyer,  the  appropriation  is  made 
unless  the  seller  reserves  the  right  to  recall  them. 
It  is  assumed  that  the  carrier  is  the  agent  of  the 
buyer  and  not  of  the  seller.  For  example,  when  A 
orders  goods  of  B  and  agrees  to  pay  the  freight,  they 
may  be  said  to  be  appropriated  when  they  are 
delivered  to  the  carrier.  There  is  some  difference 
of  opinion  regarding  the  question  of  appropriation 
when  the  shipment  is  made  C.O.D.  When  the  seller 
pays  the  freight  the  carrier  is  his  agent,  and  there 
is  no  delivery  until  the  goods  have  left  the  hands  of 
the  carrier. 

A  chattel  mortgage  is  a  conditional  sale  of  personal 
property  in  which  the  title  passes  at  once  with  the 
understanding  that  it  shall  revert  to  the  original 
owner  in  case  the  mortgagor  shall  pay,  or  cause  to  be 
paid,  a  certain  amount  contracted  for  in  a  collateral 
undertaking.  In  this  case  the  possession  remains  in 
the  mortgagor,  but  the  title  passes  to  the  mortgagee 
upon  the  condition  stated. 

In  New  York  state  it  is  held  that  the  mortgagee  has 
a  special  property  in  the  thing  mortgaged,  but  that 
title  does  not  vest  in  him  until  default  in  payment  of 
the  principal  debt  which  the  mortgage  was  given  to 
secure. 


SALES   OF   PERSONAL   PROPERTY  83 

LESSON  XXIV 

SALES  —  CONTINUED 

46.  WARRANTIES. 

46.  Warranties.  —  In  the  sale  of  personal  property 
there  may  be,  in  addition  to  certain  conditions, 
warranties  either  expressed  or  implied.  A  warranty 
is  an  agreement  regarding  the  goods  which  are  the 
subject  of  the  contract,  but  collateral  to  the  main 
purpose  of  the  contract,  the  breach  of  which  gives 
rise  to  a  claim  for  damages  only.  A  separate  con- 
sideration is  not  required  for  the  warranty,  unless  it 
was  made  after  the  principal  contract.  In  the  sale 
of  goods  where  there  are  conditions  precedent,  the 
title  does  not  pass  until  the  conditions  are  fulfilled. 
Goods  sold  subject  to  trial  illustrate  this  Jdnd  of 
condition.  Where  there  are  conditions  subsequent 
the  title  passes,  but  reverts  to  the  seller  upon  the 
fulfillment  of  certain  conditions.  A  chattel  mort- 
gage illustrates  this  kind  of  condition.  In  the  case 
of  warranties  the  title  passes  immediately,  if  it  be  the 
intention  of  the  parties.  The  remedy  for  a  breach 
of  warranty  is  an  action  for  damages. 

When  goods  are  sold  from  a  sample,  there  is  an 
implied  warranty  that  they  are  equal  to  the  sample 
in  quality  and  are  of  the  exact  kind  represented  by] 
the  sample. 

When  a  buyer  orders  goods  to  be  made  for  a  specific 
purpose,  there  is  an  implied  warranty  that  they  will 


84  SALES  OF  PERSONAL  PROPERTY 

be  suited  to  the  purpose  for  which  they  were  ordered. 
There  is  a  further  implied  warranty  in  the  case  of  all 
manufactured  goods,  that  the  goods  are  free  from 
latent  defects.  Retailers  do  not  warrant  impliedly 
that  goods  sold  by  them  are  free  from  latent  defects, 
as  they  have  no  better  opportunity  to  examine  the 
goods  than  has  the  buyer.  When  selling  food  direct 
to  the  consumer,  retailers  impliedly  warrant  it  is 
fit  for  consumption.  The  manufacturer,  however, 
is  supposed  to  know  whether  there  are  defects  in  the 
workmanship  that  tend  to  render  the  goods  unfit  for 
the  uses  that  are  to  be  made  of  them. 

There  may  be  any  number  of  express  warranties  in 
connection  with  a  sale  and,  when  express  warranties 
are  made  regarding  the  quality  of  the  thing  sold, 
caveat  emptor  does  not  apply  as  to  the  qualities  war- 
ranted. In  all  cases  where  the  goods  are  inspected 
by  the  buyer  and  his  judgment  as  to  the  quality  and 
kind  is  relied  upon  by  him,  there  is  no  implied  war- 
ranty either  as  to  the  quality  or  kind.  If  the  goods  are 
not  what  the  buyer  thinks  they  are,  he  has  no  remedy 
against  the  seller.  When  the  goods  are  purchased,  a 
buyer  who  has  not  sufficient  expert  knowledge  to 
enable  him  to  judge  regarding  the  quality  and  quan- 
tity, should  require  a  warranty  as  to  the  thing  about 
which  he  is  in  doubt. 

In  determining  whether  or  not  there  has  been  an 
express  warranty,  much  latitude  is  allowed  for  what  is 
known  as  "  dealer's  talk."  One  may  say,  for  ex- 
ample, "  this  is  the  best  machine  of  its  kind  in  the 


SALES  OF   PERSONAL   PROPERTY  85 

world,"  or,  "this  machine  runs  so  easily  that  it  will 
run  alone."  Such  expressions  cannot  be  considered 
warranties. 

Any  statement  which  is  clearly  an  expression  of 
opinion  rather  than  a  statement  of  fact  cannot  be 
considered  a  warranty.  One  who  says,  "  If  you  buy 
this  horse  now  and  keep  him  until  December,  you 
will  be  able  to  sell  him  for  50  per  cent  more  than  I 
am  asking  you  for  him,"  is  not  making  a  statement 
of  fact  capable  of  proof,  but  is  merely  giving  an  opin- 
ion regarding  the  matter. 

Remedies  for  Breach.  —  In  all  cases  where  there  is 
a  breach  of  warranty  the  defaulting  party  is  liable 
to  an  action  for  damages.  If,  however,  the  title  to 
the  property  has  passed,  the  buyer  must  keep  it. 

When  the  title  to  the  goods  has  not  passed  and  the 
buyer  refuses  to  accept  them  when  they  are  properly 
offered  by  the  seller,  the  latter  may  sell  them  to 
another  party  and  bring  an  action  against  the  first 
buyer  for  the  damages  which  will  be  the  difference 
between  the  contract  price  and  the  actual  selling 
price  plus  any  expense  that  may  have  been  incurred 
in  making  the  second  sale ;  or,  the  seller  may  store 
the  goods  at  the  risk  of  the  buyer  and  bring  an  action 
for  the  contract  price  plus  any  necessary  expenses; 
or,  in  the  case  of  goods  that  have  a  market  value, 
the  seller  may  retain  the  goods  and  sue  the  buyer 
for  the  difference  between  the  contract  price  and  the 
market  price.  In  all  such  cases  only  actual  damage 
can  be  recovered.  When  the  seller  sustains  no  dam- 


86  SALES   OF   PERSONAL   PROPERTY 

age  by  reason  of  the  failure  of  the  buyer  to  accept  the 
goods,  the  seller  cannot  recover  in  an  action  at  law. 
In  cases  where  the  seller  refuses  to  deliver  in  ac- 
cordance with  his  contract,  the  buyer  may  purchase 
similar  property  elsewhere  and  sue  the  defaulting 
seller  for  the  difference  between  the  contract  price 
and  what  he  was  obliged  to  pay  for  the  goods  pur- 
chased ;  or,  the  buyer  may  sue  the  seller  for  the 
difference  between  the  contract  price  and  the  market 
price  in  the  case  of  goods  that  have  a  market  value. 
Specific  performance  will  occasionally  be  ordered 
by  a  Court  of  Equity  when  a  seller  refuses  to  deliver 
property  to  the  buyer.  This  decree  will  be  granted 
only  when  the  peculiar  nature  of  the  property  sold 
makes  it  impossible  to  do  justice  by  giving  damage  in 
money.  For  example,  A  buys  from  B  an  old  piece  of 
furniture  that  belonged  to  George  Washington.  It 
will  readily  be  seen  that  the  chief  value  of  this  prop- 
erty lies  in  the  fact  that  it  was  once  the  property 
of  George  Washington  and  not  in  the  utility  which  it 
possesses.  No  other  piece  of  furniture  can  be  bought 
that  will  take  its  place,  and  the  only  way  in  which 
justice  can  be  done  the  buyer  is  to  require  the  seller 
to  deliver  the  specific  piece  of  furniture  to  him.  In 
cases  where  the  title  has  actually  passed  and  the 
property  has  been  delivered,  the  only  remedy  which 
the  seller  has  against  the  buyer  who  refuses  to  pay 
for  the  property  is  an  action  for  the  contract  price,  or 
for  the  reasonable  value  of  the  goods  when  no  con- 
tract price  has  been  agreed  upon. 


SALES  OF   PERSONAL   PROPERTY  87 

Stoppage  in  Transitu.  —  It  sometimes  happens  that 
the  seller,  after  shipping  goods  to  a  buyer,  learns  that 
the  latter  is  insolvent.  Upon  the  receipt  of  such  in- 
formation the  seller  may  notify  the  carrier,  in  whose 
hands  the  goods  are,  not  to  deliver  them  to  the  buyer, 
but  to  hold  them  subject  to  the  seller's  orders.  The 
right  to  do  this  is  called  stoppage  in  transilu.  In 
exercising  this  right  the  seller  should  be  sure  that  the 
buyer  is  insolvent  at  the  time  he  stops  the  delivery  of 
the  goods.  If  the  information  upon  which  the  seller 
bases  his  action  is  incorrect,  he  renders  himself  liable 
for  any  damage  which  the  buyer  may  sustain  as  the 
result  of  his  action. 

Seller's  Lien.  —  This  is  the  right  which  an  unpaid 
seller  has  to  retain  goods  until  they  are  paid  for. 
The  right  can  be  exercised  only  upon  the  following 
conditions  :  First,  the  seller  must  be  unpaid  in  whole 
or  in  part.  Second,  he  must  be  in  possession  of  all 
or  part  of  the  goods.  Third,  the  term  of  credit,  if 
any,  must  have  expired,  or  the  buyer  must  have  be- 
come insolvent.  Fourth,  title  to  the  goods  must  have 
passed  to  the  buyer. 

The  right  may  be  exercised  upon  any  of  the  goods 
in  the  seller's  possession  and  they  may  be  retained 
for  the  non-payment  of  any  part  of  the  purchase 
price.  However,  the  lien  does  not  exist  for  any  debt 
of  the  buyer  to  the  seller,  other  than  the  purchase 
price  of  the  particular  goods  upon  which  the  lien  is 
claimed.  The  lien  is  favored  by  the  courts  and  the 
conditions  usually  interpreted  in  favor  of  the  seller. 


88  CASES  ON  SALES 

LESSON  XXV 
47.   CASES  ON  SALES  OF  PERSONAL  PROPERTY. 

(1)  Shields  v.  Pettee,  4  N.  Y.  122.  —  This  action  was 
based  upon  a  contract  between  Pettee  and  Thomas 
Ingham,  for  the  plaintiff.     The  only  writing  was  in 
the  form  of  a  memorandum  as  follows  : 

New  York,  July  19,  1847.  Sold  for  Messrs.  George  W.  Shields 
&  Co.,  to  Messrs.  Pettee  &  Mann,  150  tons  Gartsherrie  pig  iron, 
No.  i,  at  $29  per  ton,  one-half  at  six  months,  one-half  cash,  less 
four  per  cent,  on  board  "  Siddons." 

THOMAS  INGHAM,  Broker. 

At  the  time  this  memorandum  was  made  and  the 
contract  referred  to  was  entered  into,  the  ship  "  Sid- 
dons  "  was  known  by  both  parties  to  be  at  sea. 
Later,  the  boat  arrived,  and  the  iron  was  tendered  to 
the  defendants.  They  inspected  the  iron  and  found 
it  was  not  Gartsherrie  pig  iron  No.  I,  and  they  re- 
fused to  accept  or  pay  for  it.  This  action  was 
brought  to  recover  damages  for  such  refusal. 

(2)  Eggleston  v.   Lingham,  27  Mich.  324.  —  Ling- 
ham  bought  from  C.  Eggleston  all  the  pine  lumber 
in  Eggleston's  yard  at  Birch  Run  at  prices  varying 
according  to  the  quality  and  kind  of  lumber.     Terms 
were  set  forth  in  a  contract  signed  by  both  Lingham 
and  Eggleston.     The  contract  contained  a  provision 
that  the  lumber  was  to  be  delivered  by  Eggleston 
on  board  of  cars  when  requested  by  Lingham,  which 


CASES  ON  SALES  89 

request  should  not  be  made  later  than  the  loth  of 
the  following  November.  There  was  no  provision 
in  the  contract  as  to  the  method  of  determining  the 
quality  and  kind  of  lumber. 

A  part  of  the  money  was  paid  at  the  time  the  con- 
tract was  entered  into.  A  part  of  the  lumber  was 
loaded  a  few  days  later,-both  Lingham  and  Eggleston 
being  present  and  agreeing  upon  the  number  of 
pieces  loaded  and  further  that  the  measurement  of 
these  pieces  should  be  made  later.  At  this  time 
there  was  a  disagreement  between  the  two  parties 
as  to  whether  they  had  fixed  upon  a  person  to  in- 
spect the  lumber.  No  further  deliveries  were  made, 
and  on  the  9th  day  of  October  there  were  forest  fires 
raging  near  Birch  Run,  and  Lingham  told  Eggleston 
that  he  had  better  load  several  cars  of  the  lumber 
and  have  it  inspected  as  it  was  unloaded.  Eggles- 
ton went  to  Birch  Run,  but  when  he  arrived  there  the 
lumber  was  entirely  surrounded  by  fire  and  was  soon 
destroyed.  Eggleston  maintained  that  the  title  had 
passed  and  brought  an  action  against  Lingham  to 
recover  the  purchase  price  of  the  lumber. 

(3)  Goddard  v.  Binney,  115  Mass.  450.  —  In  this 
case,  the  plaintiff  entered  into  a  contract  with  Bin- 
ney,  in  which  the  former  was  to  manufacture  for  the 
latter  a  buggy  according  to  certain  specifications,  in- 
cluding the  purchaser's  monogram  on  the  side. 
After  the  carriage  had  been  completed,  and  notice 
had  been  given  to  the  defendant  to  come  and  take  it 
away,  the  carriage  factory  burned,  and  the  buggy  was 


90  CASES  ON  SALES 

destroyed.  It  was  shown  that  the  purchaser  not 
only  had  been  notified  that  the  buggy  was  ready  for 
delivery,  but  had  asked  the  maker  to  give  him  a  little 
more  time  in  which  to  pay  for  it  and  take  it  away. 
He  had  also  requested  the  maker  not  to  sell  it,  but  to 
hold  it  for  him.  This  action  was  brought  to  recover 
the  purchase  price. 

(4)  Rochester  Distilling  Co.  v.  #0.^,1 42  N.Y.  570.— 
In  this  case  it  appeared  that  a  man  by  the  name  of 
Lovell,  who  had  rented  certain  farm  lands,  gave  to 
one   Page  a  chattel   mortgage  on  all   his  corn,  po- 
tatoes, oats,  and  beans  which  were  then  planted  and 
to  be  planted  the  next  year.     At  the  time  the  chattel 
mortgage  was  given  only  a  part  of  the  potatoes  were 
planted    and   none   of  the   beans.     Several   months 
later  the  Rochester  Distilling  Co.  brought  an  action 
against  Lovell  and  secured  a  judgment.     The  sheriff 
levied   upon   the   growing   crops   and   sold   them   at 
public  sale  to  the  Rochester  Distilling  Co. 

Later,  Page,  who  held  the  chattel  mortgage  on 
these  crops,  foreclosed  his  mortgage  and  sold  the 
crops  under  foreclosure  to  Rasey,  who  took  possession 
of  the  crops,  and  this  action  was  brought  by  the 
Rochester  Distilling  Co.  to  recover  possession  of 
them. 

(5)  Groat  v.  Gile,  51   N.  Y.  431.  —  Gile  owned   a 
flock  of  sheep.     Groat,  a  buyer,  after  looking  at  the 
sheep,  offered  Gile  $4  apiece  for  all  of  them  except 
two.     Gile  had  stated  that  there  were  about  a  certain 
number  of  sheep  and  lambs.     He  did  not  know  the 


CASES   ON   SALES  91 

exact  number.  It  was  agreed  that  the  lambs  should 
be  left  in  the  care  of  Gile  until  the  middle  of  the 
following  September  and  the  old  sheep  until  the  first 
of  November.  Nothing  was  said  about  the  wool  on 
the  sheep.  Between  the  time  of  entering  into  the 
contract  and  the  time  of  making  the  delivery,  Gile 
clipped  the  wool  from  the  sheep  and  sold  it.  This 
action  was  brought  to  recover  the  value  of  the  wool. 

(6)  Mount  v.  Wolcott,  36  N.  J.  L.  262.  —  Wolcott,  a 
merchant,  was  asked  by  Mount  for  early  strap-leaf, 
red-top  turnip  seed,  and  Wolcott  showed  him    and 
sold  him  seed  which  Wolcott   said  was  early  strap- 
leaf,  red-top  turnip  seed.     Mount  explained  at  the 
time  he  purchased  this  seed  that  it  was   an  early 
variety,  very  much  in  demand  in  New  York  City, 
and  that  he  was  in  the  habit  of  raising  it  for  the 
early  New  York  market. 

The  seed  was  sown  upon  ground  prepared  by 
Mount,  and  when  the  crop  matured  it  proved  to  be 
Red-Russia  turnip,  which  was  good  only  for  cattle, 
and  unsalable  in  the  market.  This  action  was 
brought  by  Mount  against  W'olcott  for  damages. 
The  evidence  proved  conclusively  that  Wolcott  did 
not  know  that  the  turnip  seed  which  he  sold  was  not 
what  he  represented  it  to  be.  He  bought  it  for  early 
strap-leaf,  red-top  turnip,  and  sold  it  under  the  same 
name.  It  was  impossible  to  discover  by  an  examina- 
tion of  the  seed  whether  it  was  one  kind  or  the  other. 

(7)  Hurffv.  Hires,  40  N.  J.  L.  581.  —  Hurff  bought 
of  one  Heritage  two  hundred  bushels  of  corn,  out  of  a 


92  CASES  ON  SALES 

lot  of  four  or  five  hundred  bushels  which  Heritage 
had  in  his  crib.  He  inspected  and  approved  of  the 
corn  before  it  was  bought,  and  paid  cash  for  it  im- 
mediately. It  was  arranged  between  Hurff  and  Heri- 
tage that  the  corn  should  be  left  where  it  was  until 
it  got  hard  enough  to  keep  well  in  bulk,  and  then 
Heritage  was  to  deliver  it.  Later,  Hiers,  a  sheriff 
in  the  county  of  Salem,  having  an  execution  against 
Heritage,  levied  on  the  entire  quantity  of  corn. 
After  this  levy  was  made,  Heritage  delivered  two 
hundred  bushels  of  the  corn  to  Hurff,  whereupon 
sheriff  Hiers  brought  an  action  against  Hurff  to 
recover  the  corn. 

(8)  White  v.  Oakes,  88  Me.  367.  —  Oakes  was   a 
furniture  dealer,  and  sold  a  folding  bed   to  White. 
At  the  time  of  the  sale  there  was  no  expressed  war- 
ranty of  any  kind.     The  bed  proved  to  be  dangerous 
to  persons  using  it,  not  because  it  was  defective  in 
manufacture,    but   because   the   design   was   faulty. 
The  bed,  upon  being  used,  closed  up  and  injured  a 
man  sleeping  in  it  so  that  he  became  partially  para- 
lyzed.    The  furniture  dealer,  Oakes,  was  not   aware 
of  this   danger.     This   action   was   brought   by   the 
owner  against  the  dealer  for  damages. 

(9)  Dinsmore  v.  Barker,  72  Pa.  St.  427. — A  man 
who  claimed  to  be  the  agent  of  Barker  &  Co.,  but 
who  had  no  connection  with  the  firm,  came  to  Dins- 
more  and  purchased  his  wool  for  Barker  &  Co.     A 
memorandum  was  given  on  a  business  card  of  Bar- 
ker &  Co.,  and  Dinsmore  was  told  to  ship  the  wool  to 


CASES  ON  SALES  93 

them  and  to  call  at  their  office  to  pay.  The  wool  was 
shipped  as  directed,  but  was  delivered  by  the  carrier 
to  the  man  who  had  represented  himself  to  be  the 
agent  of  Barker  &  Co.  He,  the  agent,  then  sold  the 
goods  to  Barker  &  Co.  as  his  own,  and  received  pay- 
ment therefor.  Later,  Dinsmore  went  to  Barker  & 
Co.  for  the  amount  due  from  them  in  accordance 
with  their  supposed  contract,  and  Barker  &  Co.  re- 
fused to  pay,  whereupon  Dinsmore  brought  an  action 
against  Barker  &  Co.  to  recover  the  goods. 


LESSON  XXVI 

(1)  Symnsv.  Schotten,  35  Kan.  310.  —  Schotten  sold 
goods  to  the  Emporia  Mercantile  Association.     The 
goods   were    sold    on    credit    and   were    shipped    by 
freight.     They   had   reached    Emporia,   the   city   in 
which  the  Emporia  Mercantile  Association  did  busi- 
ness, and  were  stored  in  the  warehouse  of  the  rail- 
road company.     While  they  were  in  the  warehouse, 
Schotten  learned  of  the  bankruptcy  of  the  Emporia 
Mercantile   Association,    and    notified    the    railroad 
company  to   hold   the  goods   subject   to   his   order. 
Symns,  representing  the  Emporia  Mercantile  Asso- 
ciation,   brings    this    action    to    determine   whether 
Schotten  had  the  right  to  stop  the  delivery  of  the 
goods. 

(2)  Hyde  v.  Cookson,  21  Barb.  (N.  Y.)  92.  —  Plain- 
tiff  and   one   Osborn    entered    into    an     agreement 


94  CASES  ON  SALES 

whereby  plaintiff  furnished  certain  hides  to  Osborn, 
who  took  them  to  his  tannery  and  manufactured 
them  into  sole  leather,  and  was  to  return  them 
to  plaintiff  in  New  York.  Plaintiff  was  then  to 
sell  them  at  his  discretion,  and  when  sold  the  net 
proceeds,  less  costs,  commissions  of  plaintiff,  ex- 
penses, etc.,  were  to  go  to  Osborn  for  tanning.  If 
there  was  any  loss,  Osborn  was  to  stand  it.  Osborn 
failed  before  the  contract  was  completed,  and  assigned 
to  defendant.  Defendant  refused  to  deliver  the 
hides  to  plaintiff,  claiming  it  was  a'  sale  and  the  title 
was  in  Osborn. 

(3)  Dexter  v.  Norton,  47  N.  Y.  62.  — This  was  an 
action  to  recover  damages  for  breach  of  a  contract 
by  defendant  to  sell  and  deliver  to  plaintiff  621  bales 
of  cotton  bearing  certain  marks  and  numbers  specified 
in  the  contract  at  a  certain  price.     After  defendant 
had  delivered  460  bales,  the  remaining  161  bales  were 
destroyed  by  fire  without  fault  or  negligence  of  the 
defendant. 

(4)  Nixon  v.  Brown,  57  N.  H.  34.  —  Plaintiff  em- 
ployed  one   M   to   purchase    a   horse   for   him.     M 
bought  the  horse,  paid  for  it  with  plaintiff's  money, 
and  took  the  bill  of  sale  in  his  own  name.     He  after- 
wards informed  the  plaintiff  of  what  he  had  done 
and  showed  him  the  bill  of  sale,  but  plaintiff  allowed 
him  to  go  away  with  the  horse  and  the  bill  of  sale. 
M  went  to  the  defendant,  who  had  no  knowledge  of 
the  agency,  showed  him  the  bill  of  sale  and  sold  him 
the  horse.     Suit  was  brought  to  recover  the  horse. 


CASES  ON   SALES  95 

(5)  McConihe  v.   New    York   &  Erie  Railroad,  20 
N.  Y.  495.  —  This  was  an  action  to  recover  damages 
upon  a  contract  under  which  plaintiff  was  to  furnish 
material  and  build  fifteen  lumber  cars  for  the  de- 
fendant at  $475  per  car,  to  be  paid  six  months  from 
the  date  of  delivery.     The  defendants  were  to  fur- 
nish iron  boxes  for  the  cars  of  a  model  made  by  them. 
When  the  cars  were  completed,  excepting  the  part 
prevented  by  the  default  of  the  defendants  in  not 
furnishing  the  boxes,   they  were  destroyed  by  fire 
while  in  the  possession  of  plaintiff  and  without  his 
fault. 

(6)  Graff    v.    Foster,  67     Mo.     512. — Defendant 
bought  some  oranges  of  plaintiff,  to  be  like  samples 
exhibited  by  plaintiff.     In  an  action  for  the  purchase 
price,  defendant  proved  that  the  oranges  were  greatly 
inferior  in  quality  to  sample,  and  set  up  breach  of  the 
implied  warranty. 

(7)  Rodger -s  v.  Niles,  1 1  Ohio  St.  48.  —  Niles  agreed 
with  the  plaintiff,  Rodgers,  that  he  would  deliver  to 
him  at  a  future  time  three  steam  boilers  with  which 
to  run  the  engines  in  his  roller  mill.     After  the  de- 
livery, it  was  shown  that  there  were  certain  defects 
in  the  material  which  were  unknown  to  either  the 
buyer  or  seller.     This  action  was  brought  to  recover 
damages  from  the  manufacturer. 

(8)  Huntingdon  v.  Hall,  36  Me.  501.  —  Defendant 
sold  plaintiff  a  small  house  which  was  on  another 
man's  land  and  not  occupied  by  defendant.     There 
was  no  express  warranty  of  title.     This  action  was 


96  CASES  ON  SALES 

brought  to  recover  damages  on  an  implied  warranty 
of  title,  as  defendant  did  not  own  the  house. 

(9)  Tabor  v.  Peters,  74  Ala.  90.  — The  defendant, 
who  was  a  manufacturer  of  churns,  contracted  with 
the  plaintiff  to  furnish  him  a  quantity  of  churns.  No 
express  warranty  regarding  the  quality  of  the  churns 
was  given.  The  plaintiff  found,  upon  trial,  that 
they  were  worthless  and  brought  this  action  against 
the  manufacturer  for  damages. 


LESSON  XXVII 

(1)  Hunter  v.  McLaughlin,  43  Ind.  38.  —  McLaugh- 
lin  sold  a  patent  right  in  a  ditching  machine  to  the 
plaintiff,  and  at  the  time  of  the  sale  exhibited  the 
letters  patent  and  a  model  of  the  machine.     He  also 
stated   that,   if  properly   constructed,   the   machine 
would  work  well.     The  plaintiff  proved  that  he  had 
constructed  a  machine  in  accordance  with  the  speci- 
fications and  that  it  did  not  work  well.     No  evidence 
was  introduced  to  show  that  McLaughlin  had  ever 
made   or   used    a   machine   built    after   this    model. 
There  was  no  evidence  tending  to  show  that  he  had 
represented  that  he  had   made  or  used  one.     This 
action  was  brought  by  Hunter  to  recover  damages 
upon  a  breach  of  warranty. 

(2)  Stroud  v.  Pierce,  6  Allen  (Mass.),  413. — The 
defendant  sold  a  piano  to  the  plaintiff  and  stated  at 
the  time  of  the  sale  that  the  instrument  is  "  Well 


CASES  ON  SALES  97 

made  and  will  stand  up  to  concert  pitch."  It  was 
proven  by  the  plaintiff  that  it  would  not  stand  up  to 
concert  pitch,  and  this  action  was  brought  to  recover 
damages  for  a  breach  of  warranty. 

(3)  Pritchard  v.  Fox,  4  Jones  Law  (N.  C.),  140. — 
Fox  sold  a  soda  fountain  to  Pritchard  and  stated  at 
the  time  of  the  sale  that  it  was  in  good  condition. 
There  were,  however,  inherent  defects  in  construction 
that  caused  it  to  get  out  of  order  from  time  to  time. 
These  defects  existed  at  the  time  of  the  sale,  but  were 
not  known  to  the  seller.  This  action  was  brought 
upon  a  breach  of  warranty. 

.(4)  Frazier  v.  Harvey,  34  Conn.  469. — Harvey 
sold  some  hogs  to  the  plaintiff.  It  afterward  ap- 
peared that,  unknown  to  both  parties,  the  hogs  had 
a  disease  which  later  caused  their  death.  This 
action  was  brought  against  Harvey  on  an  implied 
warranty  of  soundness  of  the  hogs.  Frazier  bought 
the  hogs  to  resell. 

(5)  Mottram  v.  Heyer,  5  Denio  (N.  Y.),  629.  — The 
plaintiff  sold  goods  to  the  defendants,  and  after  the 
goods  had  been  delivered  to  the  custom  house  and 
the  bills  of  lading  had  been  given  to  the  defendants, 
the  plaintiff,  learning  of  the  insolvency  of  the  de- 
fendants, notified  them  to  hold  the  goods  subject  to 
the  plaintiff's  orders.  It  was  the  intention  of  the 
plaintiffs  to  exercise  their  right  of  stoppage  in  transitu. 
Upon  the  failure  of  the  defendants  to  hold  the  goods 
as  requested  by  the  plaintiff,  this  action  was  brought 
to  recover  damages. 


98  CASES  ON  SALES 

(6)  Jones  v.  Earl,  37  Cal.  630.  — -The  plaintiff  had 
delivered  goods  to  the  defendant  to  be  transported 
to  a  designated  consignee.     While  the  carrier  was 
in  possession  of  the  goods,  the  plaintiff  delivered  to 
his  agent  a  letter  stating  that  the  consignee  had  be- 
come insolvent  and  that  he,  the  plaintiff,  desired  to 
save   the   goods   which   were   then   in   the   carrier's 
hands.     A  bill  of  particulars  was  given  to  the  agent 
describing  the  goods,  and  the  agent  was  directed  to 
deliver  them  to  no  one  but  the  plaintiff's  agent,  who 
would  be  at  their  destination  to  look  after  them. 
Upon  the  failure  of  the  carrier  to  hold  the  goods  as 
ordered,  this  action  was  brought  for  damages. 

(7)  McRea    v.    Merrifield,  '48    Ark.    160.  — The 
plaintiff  sold  an  engine,  sawmill,  and  a  lot  of  tools  to 
a  certain  person  under  a  contract  of  sale  which  ex- 
pressly stated   that   the  title  was  to  remain  in  the 
plaintiff  until  the  purchase  price  was  fully  paid.     It 
was  shown  that  the  payment  was  never  fully  made. 
The  defendant  bought  the  goods  from  the  original 
vendee  and  this  action  was  brought  to  recover  the 
property  on  the  ground  that  the  title  had  not  yet 
passed  from  McRea,  the  plaintiff  in  this  case. 

(8)  Treasurer  v.  Commercial  Mining  Co.,  23  Cal. 
390. — The  defendants  had  contracted  to  deliver  to 
the  plaintiff  forty-six    shares    of  its    capital    stock. 
Upon  their  refusal  to  do  so,  this  action  was  brought 
to  compel  specific  performance.     At  the  trial  it  was 
shown   that  the   stock   had   no   fixed   market  value 
and   that,  owing  to   much  fluctuation   in  the  value 


CASES  ON  SALES  99 

of  the  stock,  it  would  be  impossible  to  ascertain  the 
exact  damage  arising  from  the  breach  of  contract  on 
the  part  of  the  defendants. 

(9)  Terry  v.  Wheeler,  25  N.  Y.  520.  — The  defend- 
ant bought  certain  lumber  of  the  plaintiff.  At  the 
time  of  the  purchase,  the  lumber  was  in  plaintiff's 
yard.  The  pieces  sold  were  designated  and  the  price 
was  paid,  but  it  was  agreed  that  the  vendor  should 
deliver  the  lumber  at  the  railroad  station.  Before 
such  delivery  was  made,  the  lumber  was  destroyed 
by  fire  through  no  fault  of  the  plaintiff.  Upon  the 
defendant's  refusal  to  pay  for  the  lumber  this  action 
was  brought  to  recover  the  purchase  price. 


LESSON  XXVIII 
REAL 'PROPERTY  CONTRACTS 

48.  REAL  PROPERTY  IN  GENERAL. 

49.  CORPOREAL  AND  INCORPOREAL 

REAL  PROPERTY. 

48.  Real  Property  in  General.  —  In  the  lesson  on 
property,  real  property  was  defined  as  land  and  its 
appurtenances  and  personal  property  was  said  to 
be  all  other  kinds.  For  all  practical  purposes  this 
distinction  is  sufficient.  It  is  commonly  stated  that 
he  who  owns  land  in  fee  has  an  absolute  right  in  that 
land  and  in  all  that  is  above  or  below  it. 

An  interesting  question  in  connection  with  real 
property  is  one  that  has  to  do  with  the  right  of  owners 
of  real  property  to  the  water  remaining  on  or  passing 
through  their  land.  In  general  it  may  be  said  that 
one  who  owns  the  land  surrounding  still  water  has 
absolute  control  of  that  water.  He  has  the  ex- 
clusive right  to  fish  in  or  to  cut  ice  upon  water  sur- 
rounded by  his  land.  In  the  case  of  non-navigable 
running  water  he  has  the  exclusive  right  to  use  as 
much  of  the  water  as  might  be  necessary  for  ordinary 
purposes  such  as  household  use,  watering  stock,  and 

100 


REAL   PROPERTY  IOI 

for  irrigation  purposes,  providing  the  water  used  for 
irrigation  is  returned  to  its  natural  channel.  A 
miller  may  use  the  water  power  of  a  stream  so  long 
as  he  does  not  divert  the  water  used  from  its  natural 
channel  so  as  to  interfere  with  the  rights  of  those  who 
own  property  adjoining  the  stream  below  the  mill. 

In  the  case  of  navigable  streams  the  state  owns 
the  land  under  the  water  and  all  land  on  either  side 
to  high-water  mark.  Where  a  navigable  stream 
separates  two  states,  the  thread  of  the  stream  is  the 
boundary  between  them.  Any  person  may  fish  in 
navigable  water  and  may  cut  ice  and  appropriate 
it  to  his  own  use  so  long  as  he  does  not  interfere 
with  the  rights  of  owners  of  real  property  on  either 
bank  of  the  stream.  The  only  exclusive  rights  to 
the  use  of  the  navigable  stream,  that  are  possessed 
by  adjoining  landowners,  is  the  right  to  erect  piers 
for  their  own  exclusive  use  so  long  as  those  piers  do 
not  interfere  with  the  right  of  the  public  to  use  the 
stream  for  navigation. 

Subterranean  streams  of  water  cannot  be  controlled 
by  owners  of  surface  rights.  For  example,  A  drills 
a  well  upon  his  property  and  a  large  flow  of  water 
results.  Later  the  owner  of  adjacent  land  drills  a 
well  in  his  property  and,  striking  the  same  subter- 
ranean stream,  diverts  the  water  from  A's  well  to  his 
own.  A  has  no  redress. 

A  distinction  is  made  between  products  of  the  soil 
that  are  the  result  of  annual  labor,  such  as  wheat 
and  other  grains,  and  natural  products  of  the  soil 


102  REAL  PROPERTY 

such  as  grass,  trees,  etc.  Those  that  are  the  result 
of  annual  labor  are  known  as  fructus  industrials  and 
those  that  grow  naturally  from  the  soil  are  known  as 
fructus  naturalis.  The  second  class  of  products  are 
always  considered  real  property  when  attached  to 
the  soil,  and  cannot  be  changed  into  personalty 
without  being  severed  from  the  land.  When  stand- 
ing trees  are  sold  and  it  is  agreed  that  the  buyer  is 
to  cut  and  remove  them,  he  has  bargained  for  an 
interest  in  realty,  but  when  they  are  to  be  cut  and 
delivered  by  the  seller,  they  are  considered  personal 
property.  The  annual  crops  that  result  from  sowing 
or  planting  are  considered  personal  property  even 
while  attached  to  the  soil,  and  may  be  the  subject  of 
sale  or  mortgage  as  such. 

The  question  of  fixtures  as  real  property  has  been 
discussed  in  the  preceding  lessons  on  personalty. 

49.  Corporeal  and  Incorporeal  Real  Property.  - 
Real  property  may  be  divided  into  two  kinds  known 
as  corporeal  and  incorporeal  Corporeal  real  property 
is  all  tangible  property  that  can  be  classified  as  real : 
trees,  land,  houses  attached  to  land,  and  all  kinds  of 
real  property  that  are  susceptible  to  the  senses  may 
be  classified  under  this  head. 

There  is  a  kind  of  real  property  that  is  intangible, 
but  is,  nevertheless,  an  interest  in  land.  This  is 
known  as  incorporeal  real  property  and  consists  of 
rights  exercised  by  one  person  over  the  land  of 
another.  *  These  rights  are  called  easements.  For 
example,  it  is  frequently  provided  in  deeds  to  city 


REAL   PROPERTY  103 

real  estate  that  only  buildings  of  a  certain  kind,  or  of  a 
certain  value  or  size,  shall  be  built  on  the  land  con- 
veyed by  the  deed.  Or,  it  may  be  provided  that  the 
purchaser  shall  not  build  within  a  stipulated  number 
of  feet  from  the  street.  Such  provisions,  commonly 
called  restrictions,  may  be  enforced  by  the  seller, 
who  thus  has  an  easement  or  right  over  land  belong- 
ing to  another  person.  Another  form  of  easement, 
more  common  in  the  country,  is  the  right  of  one 
person  to  pass  over  the  land  of  another.  This  is 
called  a  right  of  way.  This  right,  or  easement,  may 
be  created  in  several  ways  :  by  grant,  by  implication, 
or  by  prescription.  If  A  owned  a  piece  of  property, 
he  might  grant  to  B  a  particular  right  of  way  over 
it.  If  A  should  sell  B  a  piece  of  land  entirely  sur- 
rounded by  A's  land,  B  would  have  a  "  right  of  way 
by  necessity,"  as  it  is  assumed  that  B  would  not 
have  bought  the  land  without  the  right  to  go  across 
A's  land  to  reach  it.  The  right  might  have  been 
given  in  A's  deed  to  B.  It  has  also  been  held  that 
when  one  has  used  a  right  of  way  over  another's 
land  for  many  years  without  interruption,  he  has 
acquired  a  right  of  way  by  prescription,  and  the 
owner  of  the  land  cannot  set  aside  this  right.  The 
owner  of  land  subject  to  a  right  of  way  is  not  re- 
quired ^to  keep  the  way  passable  or  to  do  any- 
thing except  allow  the  owner  of  the  right  peaceable 
use  of  it. 

Easements  may  be  granted  perpetually  or  only  for 
a  limited  period  of  time. 


104  REAL  PROPERTY 

LESSON  XXIX 

REAL   PROPERTY  —  CONTINUED 
50.  ESTATES  IN  LAND. 

50.  Estates  in  Land.  -  -  The  largest  estate  which 
one  may  have  in  realty  is  an  estate  in  fee  simple. 
Such  an  estate  amounts  to  absolute  ownership  of 
the  property  except  for  any  easements  that  may 
have  been  created,  the  right  of  the  state  to  levy  taxes 
against  it,  the  right  of  creditors  to  have  it  sold  to 
satisfy  their  claims  when  the  owner  is  in  default,  and 
the  right  of  eminent  domain.  This  right  of  eminent 
domain  is  the  right  of  the  state  or  United  States  to 
condemn  and  take  private  property  for  public  use 
upon  the  payment  of  a  reasonable  price  therefor, 
when  the  public  good  requires  that  such  private 
property  be  taken  in  condemnation  proceedings. 
This  right  is  often  exercised  by  public  service  cor- 
porations under  authority  from  the  state. 

If  the  taxes  are  not  paid,  the  state  has  the  right  to 
take  the  property  and  sell  it  at  public  auction  to  se- 
cure funds  with  which  to  pay  the  state  claim. 

One  who  owns  real  property  and  does  not  pay  his 
debts  may  be  sued  in  a  court  of  law,  and  upon  proof 
that  the  claim  is  just,  a  judgment  will  be  given  the 
creditor.  This  judgment  may  be  satisfied  by  seizing 
the  real  property  of  the  debtor  and  having  it  sold 
for  the  benefit  of  the  creditor. 


REAL   PROPERTY  105 

The  estate  in  real  property  next  in  importance  to 
fee  simple  is  an  estate  for  life.  In  this  estate  posses- 
sion and  use  of  the  property  are  given  the  person 
called  the  life  tenant  during  his  natural  life,  with  a 
vested  interest  in  the  remainder  after  the  life  estate, 
which  together  are  equivalent  to  an  estate  in  fee 
simple.  At  the  death  of  the  life  tenant  the  posses- 
sion of  the  property  either  reverts  to  the  original 
owner  or  his  heirs,  or  becomes  vested  in  some  one  else 
whom  he  has  named.  An  estate  for  life  is  created 
by  contract,  by  will,  or  by  operation  of  law.  Es- 
tates that  result  from  operation  of  law  are  known  as 
curtesy  and  dower  estates. 

When  a  husband  dies  leaving  real  property,  his 
wife  has  a  dower  interest  in  it.  By  the  common 
law  she  is  entitled  to  the  use  for  life  of  one  third  of 
all  the  realty  which  he  owned  at  the  time  of  his 
death,  or  which  he  had  owned  at  any  time  during 
their  marriage  and  in  the  conveyance  of  which  she 
did  not  join.  This  right  cannot  be  defeated  by  any 
act  of  the  husband,  nor  by  a  wife's  contract  with 
her  husband.  If  he  makes  a  will,  he  can  dispose  of 
only  two  thirds  of  his  real  property  or  the  whole 
subject  to  his  wife's  right  of  dower;  or,  he  can  make 
a  provision  for  his  wife  in  lieu  of  dower,  and  she  may 
elect  between  this  provision  and  her  dower  right. 

When  the  wife  dies,  her  surviving  husband  has  the 
life  use  of  all  the  real  property  which  she  owned  at 
the  time  of  her  death  and  which  she  did  not  dispose 
of  by  will,  providing  a  child  has  been  born  capable  of 


io6  REAL   PROPERTY 

inheriting  the  property.  The  curtesy  right  is  more 
extensive  than  the  dower  right,  in  that  it  applies  to 
all  the  wife's  realty,  but  the  former  is  dependent  on 
two  conditions,  absence  of  a  will  disposing  of  the 
property,  and  the  birth  of  an  heir.  The  dower  right 
is  an  unconditional  right  which  cannot  be  defeated 
by  any  act  of  the  husband. 

Since  the  duration  of  a  life  estate  is  indefinite,  the 
law  provides  that  the  heirs  of  the  deceased  life 
tenant  shall  have  the  right  to  harvest  crops  or  to 
have  any  other  profits  that  may  result  from  the  labor 
of  the  life  tenant.  Such  crops  or  other  profits  are 
known  as  emblements .  In  case  the  life  tenant  volun- 
tarily brings  his  tenancy  to  a  close  before  his  death, 
his  representatives  cannot  claim  emblements. 

Any  act  of  the  life  tenant  that  diminishes  the  per- 
manent value  of  the  estate  which  will  pass  to  the 
remainder-man  is  considered  waste,  and  renders  the 
life  tenant  liable  to  an  injunction  and  damages. 

In  nearly  all  states  there  has  been  passed  what  is 
called  the  Homestead  Act,  which  provides  that  one 
having  a  near  relative  such  as  mother,  father,  or 
wife  dependent  upon  him  for  support,  may  set  aside, 
in  accordance  with  the  law,  .a  home  of  a  certain 
valuation  as  a  homestead.  When  this  is  done  ac- 
cording to  the  requirements  of  the  law  in  any  state, 
the  home  may  not  be  taken  to  satisfy  claims  of  credi- 
tors even  when  a  judgment  has  been  secured  against 
the  one  owning  the  homestead.  A  debtor  becomes 
exempt  from  the  payment  of  his  debts  to  the  extent 


REAL   PROPERTY  107 

of  the  homestead  that  has  been  set  aside  for  the 
benefit  of  those  dependent  on  him.  Such  a  law  is 
not  unjust  since  the  public  is  notified  that  the  partic- 
ular home  in  question  is  exempt. 


LESSON  XXX 

ESTATES   IN   LAND  —  CONTINUED 

The  next  lower  estate  than  an  estate  for  life  is  an 
estate  for  years.  Such  an  estate  is  one  which  is  to 
continue  for  any  given  period  of  time.  It  may  be 
for  a  day,  a  month,  a  year,  or  any  number  of  years, 
providing  the  term  is  definite.  The  most  common 
form  of  an  estate  for  years  is  the  one  created  by  lease. 
In  this  kind  of  an  estate  the  owner,  called  the  land- 
lord, leases  his  property  to  the  lessee,  called  the 
tenant,  for  a  period  of  time  stipulated  in  the  lease. 
The  property  right  of  a  tenant  under  a  lease  is  con- 
sidered personal  property.  In  general,  leases  must 
conform  to  the  Statute  of  Frauds.  If  they  are  not 
to  be  completed  within  the  space  of  one  year  from 
the  date  of  making,  there  must  be  written  evidence 
to  support  them  in  order  to  make  them  enforceable 
in  a  court  of  law.  In  New  York  state,  however, 
it  has  been  specially  provided  by  statute  that  a  lease 
for  one  year  may  be  made  orally,  even  if  it  is  not  to 
begin  to  run  until  after  the  date  of  making.  This 
is  an  exception  to  the  general  rule. 

The  landlord  usually  is  expected  to  pay  the  taxes 


io8  REAL   PROPERTY 

and  in  every  way  protect  the  tenant  in  his  right  to 
use  the  premises.  The  tenant  is  expected  to  make 
repairs  with  the  exception  of  those  which  are  made 
necessary  by  natural  wear  and  tear.  He  is  expected 
to  make  only  such  use  of  the  premises  as  was  in- 
tended at  the  time  of  making  the  lease.  If  he  rents 
to  use  for  agricultural  purposes,  he  is  not  entitled  to 
quarry  or  mine  minerals  on  the  property.  If  a 
quarry  has  been  opened  and  was  being  operated  by 
the  landlord,  either  the  tenant  for  years  or  the  tenant 
for  life  would  be  entitled  to  continue  the  operation 
of  such  quarry  or  mine.  No  new  quarry  or  mine 
could  be  opened.  It  is  usually'  understood  that 
timber  standing  on  the  property  may  be  cut  by  a  ten- 
ant for  life  or  for  years  for  use  on  the  premises.  It 
may  be  used  for  fuel,  to  repair  the  buildings  or  fences, 
or  to  make  farm  implements,  but  cannot  be  sold  off 
the  farm. 

The  landlord  does  not  impliedly  warrant  that  the 
premises  are  in  a  tenantable  condition.  Neither  can 
there  be  any  implied  warranty  that  the  property  is 
suitable  for  the  purpose  for  which  it  is  rented.  If 
the  tenant  desires  assurance  on  either  of  these  two 
points,  he  must  insist  that  the  landlord  include  ex- 
press warranties  in  the  lease. 

The  tenant  agrees  to  return  the  premises  at  the 
expiration  of  his  lease  in  as  good  condition  as  he  re- 
ceived them,  ordinary  wear  and  tear  excepted. 

The  tenant  should  always  remove  all  of  his  per- 
sonal effects  during  the  term  of  his  lease,  as  he  will  be 


REAL  PROPERTY  109 

considered  a  trespasser  if  he  attempts  to  go  on  the 
property  for  the  purpose  of  removing  personal  prop- 
erty after  the  expiration  of  his  lease. 

When  the  lease  has  been  made  for  a  given  time  and 
the  tenant  continues  to  occupy  the  premises  after  the 
expiration  of  the  lease  without  any  further  agreement, 
and  with  the  knowledge  and  consent  of  the  landlord, 
it  is  understood  that  he  becomes  a  tenant  at  will  and 
that  the  relation  may  be  terminated  by  either  party 
at  any  time  by  giving  reasonable  notice.  If  the 
property  is  a  dwelling  house  and  the  rent  is  paid 
monthly,  a  month's  notice  would  be  sufficient.  If 
the  property  is  used  for  agricultural  purposes  and 
the  tenant  had  planted  crops  and  performed  the 
usual  labor  necessary  to  the  production  of  the  crops  of 
the  coming  year,  the  lease  could  not  be  terminated 
before  the  expiration  of  the  year  upon  which  he  had 
entered. 

Unless  it  is  otherwise  provided  in  the  lease,  a  ten- 
ant may  either  assign  or  sublet.  An  assignment  of 
a  tenant's  lease  is  made  when  all  of  his  rights  under 
the  lease  are  transferred  to  another  party.  In  this 
case  the  one  to  whom  the  tenant  assigns  is  responsible 
either  to  the  tenant  or  to  the  original  landlord  under 
the  terms  of  the  original  contract.  The  landlord 
may  look  either  to  the  first  tenant  or  to  the  assignee 
for  his  rent  and  for  the  performance  of  other  obliga- 
tions according  to  the  lease.  When  only  a  part  of 
the  property  or  term  covered  by  the  lease  is  turned 
over  to  another  party  by  the  tenant,  he  is  said  to  have 


no  REAL  PROPERTY 

sublet.  In  this  case  the  subtenant  is  liable  only  to 
the  tenant.  It  is  customary  to  include  in  the  lease' 
a  clause  providing  that  the  tenant  shall  neither  sub- 
let nor  assign  without  the  consent  of  the  landlord. 

Estates  may  also  be  divided  into  equitable  and  legal 
estates.  When  real  property  is  deeded  to  A  to  hold 
in  trust  for  B,  A  is  said  to  have  the  legal  estate  while 
B  has  the  equitable  estate.  A  has  exclusive  control 
of  the  property  and  must  exercise  his  right  over  it 
for  the  benefit  of  B,  whose  only  right  in  connection 
with  the  property  is  to  have  the  proceeds  that  are 
derived  from  its  use  after  the  necessary  expenses 
have  been  met. 

Estates  are  also  divided  according  to  the  number 
of  owners.  When  real  property  is  owned  by  one 
person,  it  is  called  an  estate  in  severally. 

When  two  or  more  persons  own  real  property  as 
joint  tenants,  the  estate  is  called  a  joint  tenancy. 
Each  joint  tenant  owns  a  certain  interest  in  each  and 
every  part  of  the  estate.  Upon  the  death  of  any 
joint  tenant  his  interest  immediately  passes  to  the 
surviving  joint  tenants.  Thus  it  will  be  seen  that 
the  last  joint  tenant  will  become  owner  of  the  prop- 
erty in  fee  simple.  In  order  to  create  such  an  es- 
tate it  is  necessary  that  the  deed  contain  words  that 
clearly  indicate  that  such  an  estate  is  intended. 

When  two  or  more  persons  own  real  property  as 
tenants  in  common,  the  estate  is  called  tenancy  in 
common.  In  such  an  estate  each  tenant  owns  a 
certain  interest  in  every  part  of  the  property,  but 


REAL   PROPERTY  III 

upon  his  death,  his  interest  goes  to  his  heirs  who 
become  tenants  in  common  with  the  surviving  ten- 
ants. In  the  United  States  a  tenancy  in  common  is 
understood  to  be  intended  when  property  is  deeded 
to  two  or  more  persons  without  words  which  clearly 
indicate  a  different  intention,  except  in  the  case  of 
property  deeded  to  a  husband  and  wife,  which 
creates  an  estate  known  in  some  states  as  an  estate 
by  the  entirety.  When  property  is  so  deeded,  it  will 
belong  to  the  survivor  in  fee  simple  upon  the  death 
of  either  the  husband  or  wife. 

LESSON  XXXI 

REAL    PROPERTY  — CONTINUED 
51.    CONVEYANCES 

51.  Conveyances.  —  Land  is  conveyed  from  the 
owner  to  the  buyer  by  means  of  a  deed.  There  are 
three  principal  forms,  the  quitclaim  deed,  bargain 
and  sale  deed,  and  full  covenant  warranty  deed. 

A  quitclaim  deed  is  one  in  which  the  owner  surren- 
ders all  right,  title,  or  interest  which  he  may  have 
in  the  property  to  the  grantee,  but  does  not  even 
guarantee  that  he  has  any  right,  title,  or  interest 
whatever.  Such  a  deed  would  be  acceptable  only  to 
one  who  is  in  a  position  to  know  exactly  what  the 
title  of  the  grantor  is.  When  two  or  more  heirs  to 
real  property  are  settling  an  estate,  it  is  sometimes 
desirable  for  one  to  purchase  the  interest  of  the  others. 


112  REAL   PROPERTY 

If  A,  B,  and  C  are  heirs,  A  has  as  much  knowledge  of 
the  title  of  B  and  C  as  they  have,  and  would  be  will- 
ing to  accept  from  them  a  quitclaim  deed,  as  their 
interest  is  equal  to  his ;  and  having  satisfied  himself 
as  to  his  own  title,  there  could  be  no  question  in  his 
mind  regarding  theirs.  If  two  partners  purchased 
real  property  through  the  investigation  of  only  one 
of  the  partners,  the  one  who  made  the  investigation 
should  be  willing  to  accept  a  quitclaim  deed,  if  he 
should  buy  out  his  partner's  interest,  as  he  has  a 
better  knowledge  of  the  title  than  has  the  grantor. 

A  bargain  and  sale  deed  is  one  by  which  the  grantor 
conveys  property  in  fee  to  the  grantee  and  all  the 
grantor's  right,  title,  and  interest  thereto,  but  makes 
no  covenants  or  warranties  as  to  the  title  or  anything 
in  connection  with  the  property.  This  kind  of 
deed  is  common  where  the  title  to  the  property  is 
guaranteed  by  a  title  guaranty  company. 

A  full  covenant  warranty  deed  is  one  in  which  the 
property  is  granted  to  the  grantee  and  his  heirs,  and 
the  grantor  warrants  that  he  has  full  title  to  the 
property  and  that  there  are  no  claims  against  it,  and 
he  further  convenants  that  he  will  protect  the  grantee 
in  his  possession  of  the  property  forever.  This  is 
the  form  of  deed  usually  given  by  a  seller  to  a  buyer 
of  real  property. 

A  land  contract  is  an  agreement  between  two 
parties  in  which  one  promises  to  sell,  and  the  other 
to  buy,  a  described  piece  of  real  property  at  a  stated 
future  time  and  upon  agreed  terms.  It  does  not 


REAL  PROPERTY  113 

amount  to  conveyance  of  title,  but  upon  the  failure  of 
either  to  fulfill  his  part,  the  one  so  failing  to  perform 
would  be  liable  in  an  action  for  breach  of  contract. 
Where  justice  can  be  done  in  no  other  way,  a  court  of 
equity  would  decree  specific  performance. 

A  mortgage  was  a  conditional  sale  under  the  com- 
mon law,  and,  immediately  upon  executing  the  mort- 
gage, the  title  passed  to  the  mortgagee  under  a  pro- 
vision that  it  should  revert  to  the  mortgagor  upon 
the  payment  of  a  debt  which  was  usually  represented 
by  a  note  or  bond.  Thus  it  will  be  seen  that  the 
mortgage  was  given  as  collateral  security  for  the 
payment  of  the  bond.  So  much  hardship  was  caused 
by  the  practice  of  enabling  the-mortgagee  to  become 
the  absolute  owner  of  the  mortgage  upon  default  in 
payment  of  the  debt  which  the  mortgage  was  given 
to  secure,  that  the  common  law  rule  has  been  changed 
by  statute  in  nearly  all  the  states.  The  mortgagee, 
upon  default  in  payment,  may  foreclose  his  mortgage 
and  give  notice  that  unless  the  debt  with  interest  is 
paid  by  a  certain  time,  the  property  will  be  sold,  and 
the  proceeds  applied  toward  the  payment  of  such 
debt.  The  law  provides  that  the  mortgagor  may, 
within  a  stated  time,  secure  the  property  by  the  pay- 
ment of  the  debt  with  interest  and  all  costs.  This 
is  known  as  the  mortgagor's  right  of  redemption. 
If  mortgaged  property  is  sold  to  satisfy  the  debt, 
and  there  is  a  surplus  after  the  debt  is  paid,  the  mort- 
gagor is  entitled  to  it. 

There  may  be  any  number  of  mortgages  on  a  given 


114  REAL  PROPERTY 

piece  of  real  property.  Where  more  than  one  mort- 
gage exists,  these  will  be  paid  in  the  order  in  which 
they  are  recorded. 

A  deed  of  real  estate  is  not  operative  until  it  has 
been  delivered.  A  deed  may  be  signed,  sealed,  and 
witnessed,  but  it  is  of  no  effect  until  it  has  been 
actually  handed  by  the  grantor  to  the  grantee  or 
his  representative.  For  example,  it  has  been  held 
that  a  deed  which  has  been  properly  executed  by  a 
grandfather  to  his  grandson,  but  which  was  not  de- 
livered by  the  grandfather  before  his  death,  does  not 
convey  to  the  grandson  the  property  described  in 
the  deed.  When  a  deed  that  is  intended  to  become 
operative  after  the  ex-piration  of  a  certain  time,  or  at 
the  death  of  the  grantor,  has  been  delivered  to  a  third 
party  with  instructions  to  deliver  to  the  grantee  upon 
the  happening  of  a  certain  event,  such  delivery  is 
called  a  delivery  in  escrow  and  will  have  the  same 
effect  as  if  the  delivery  had  been  direct  by  the  grantor 
to  the  grantee. 

The  one  to  whom  property  is  mortgaged  or  deeded 
should  immediately  have  the  mortgage  or  deed  re- 
corded in  the  County  Clerk's  office  or  in  such  other 
place  as  may  be  designated  by  law.  The  purpose  of 
recording  deeds  and  mortgages  is  to  notify  the  public 
regarding  the  transfer.  It  should  be  remembered 
that  while  the  recording  of  a  deed  is  not  necessary 
to  establish  its  validity  as  far  as  the  buyer  and  seller 
are  concerned,  yet,  -should  the  buyer  neglect  to  have 
his  deed  recorded,  the  one  from  whom  he  bought 


CASES  ON   REAL   PROPERTY  115 

might  sell  to  an  innocent  third  party  who,  upon  hav- 
ing his  deed  recorded,  would  become  the  owner  of 
the  property  as  against  the  first  buyer. 


LESSON  XXXII 
52.   CASES  ON  REAL  PROPERTY. 

(1)  McConnell  v.  Blood,  123  Mass.  47.  —One  Cun- 
ningham   owned    a    shoe    shop   containing   various 
pieces  of  machinery,  viz.,  an  engine  and  boiler,  steam 
gauge,  water  tank,  steam  pump,  lines  of   shafting 
connected  with  the  engine,  and  about  twelve  small 
machines   used  in  the  shoe  business.     All  the  ma- 
chinery was  fastened  to  the  building  more  or  less 
securely.     McConnell    claimed    the    machinery    as 
vendee  thereof  from  Cunningham,  and  Blood  claimed 
it  under  a  mortgage  covering  all  the  realty. 

(2)  Astry  v.  Ballard,  2  Mod.  Rep.  (Eng.)  193.- 
Astry  leased   to    Ballard    certain   premises  without 
mentioning  the  use  to  which  they  were  to  be  put, 
and  without  mentioning  mines.     BaHlard  found  cer- 
tain coal  mines  on  the  premises,  some  opened  and 
workable  and  others  which  had  never  been  opened. 
He  took  coal  from  the  opened  mines  and  also  opened 
and  worked  the  new  mines.     Astry  brought  suit  for 
the  value  of  all  the  coal  taken  out  and  sold. 

(3)  Tulk  v.  Moxhay,  2  Phillips  (Eng.),  774.  — Tulk 
sold   a  piece  of  open  ground  surrounded  by  houses 
to  one  Elms,  who  covenanted  in  the  deed  to  keep  the 


Il6  CASES  ON  REAL  PROPERTY 

ground  in  good  repair,  to  maintain  the  iron  fence  and 
statue,  and  to  preserve  the  park  or  square  in  an  open 
state,  without  any  buildings.  The  land  passed  by 
various  conveyances  to  Moxhay,  whose  deed  con- 
tained none  of  the  convenants.  Moxhay  intended 
to  alter  the.  character  of  the  square,  and  to  build  on 
it,  when  Tulk  sought  an  injunction  to  prevent  his 
doing  so. 

(4)  Witty  v.  Matthews,  52  N.  Y.  512.  —  Matthews 
leased  to  Witty  certain  premises.     The  only  state- 
ments in  the  lease  as  to  repairs  were  as  follows  :    (a) 
If  the  premises  were  partially  damaged  by  fire,  but 
not  rendered  untenantable,  the  landlord  should  re- 
pair them  at  his  expense,     (b)  If  the  premises  were 
rendered  untenantable,  the  rent  should  cease  until 
repairs  were  made,     (c)  If  the  premises  were  totally 
destroyed,  the  lease  should  terminate.     During  the 
life  of  the  lease  the  building  was  so  damaged  by  fire 
as  to  be  untenantable,  but  was  not  destroyed.     The 
landlord  refused  to  repair  the  premises  and  Witty 
sued  for  damages  for  breach  of  the  convenants  of 
the  lease. 

(5)  Barson  v.  Mulligan,  191  N.  Y.  306.  —  Mulligan 
owned  a  parcel  of  land  in  Albany  and  gave  a  mortgage 
thereon  for  five  years  to  Barson  to  secure  an  indebted- 
ness.    At  the  end  of  five  years  the  debt  was  not  paid 
and  Barson  commenced  an  action  of  ejectment  to  put 
Mulligan  off  the  land,  claiming  he  had  legal  title  to 
it  by  virtue  of  his  mortgage. 

(6)  Kimball  v.  Sattley,  55  Vt.  285.— One  Roberts 


CASES  ON  REAL   PROPERTY  117 

owned  a  farm  on  which  were  growing  crops  of  rye, 
wheat,  and  potatoes,  a  field  of  natural  hay,  and  a  wood 
lot.  The  entire  farm  with  all  the  buildings  and 
appurtenances,  was  subject  to  a  mortgage  in  which 
Kimball  was  the  mortgagee.  Roberts  gave  a  chattel 
mortgage  to  Sattley,  covering  all  the  stock,  grain, 
hay,  and  personal  property  on  the  premises.  By 
virtue  of  his  mortgage,  Sattley  took  possession  of 
the  rye,  wheat,  and  potatoes,  cut  and  carried  away 
the  hay  from  the  field,  took  two  cords  of  wood  piled 
in  the  wood  lot,  and  cut  a  number  of  standing  trees. 
Kimball  brought  suit  for  the  value  of  all  the  things 
taken,  claiming  them  by  virtue  of  his  general  mort- 
gage. 

(7)  Stone  v.  Cocks,  67  Miss.  511.  —  Stone  prepared 
a  deed  of  a  piece  of  land  which  he  owned  to  his  sister, 
Mrs.  Cocks,  and  put  it  in  his  safe.     Being  in  poor 
health  and  about  to  start  on  a  journey,  he  told  his 
clerk,  Jacques,  about  the  deed  and  told  him  not  to 
deliver  the  deed  to  Mrs.  Cocks  unless  he  died  on  the 
journey.     He  did  die  on  the  journey  and  Jacques 
delivered  the  deed  to  Mrs.  Cocks.     Mrs.  Stone  then 
brought  suit  to  have  the  deed    canceled,   and    for 
possession  of  the  property  as  her  husband's  heir. 

(8)  Stevens  v.  Kelley,  78  Me.  445.  —  Kelley  owned  a 
mill  and  a  mill  dam  on  a  non-navigable  stream.     The 
dam  set  backwater  on  Stevens's  land,  forming  a  pond 
from  which  ice  could  be  cut  in  the  winter.     The  mill 
had  been  abandoned  for  some  years,  and  the  dam  was 
not  used  except  that,  when  the  ice  formed  on  the 


Il8  CASES   ON   REAL   PROPERTY 

pond, the  defendant  would  draw  offthe  water  and  pre- 
vent the  plaintiff  from  harvesting  the  ice.  Stevens 
sued  for  damages. 

(9)  Shock  v.  City  of  Canton,  66  Ohio  St.  19.  —  Shock 
owned  a  mill  on  a  small  river  below  the  city  of  Can- 
ton and  derived  power  to  run  his  mill  from  the  river. 
The  city  had  established  water  works  on  the  river 
and  took  water  for  domestic,  commercial,  and  manu- 
facturing purposes.     As  the  city  grew,   it   used   so 
much  water  that  Shock  could  not  get  enough  power 
to  run  his  mill  and  brought  suit  against  the  city  for 
damages. 

(10)  Bancroft  v.  White,  i  Caines   (N.  Y.),  185.- 
Hawes,  a  former  husband  of  the  plaintiff,  conveyed 
a  piece  of  land  in  the  town  of  Canaan,  owned  by  him 
during  his  marriage,  to  one  Brooker,  and  by  various 
conveyances  it  came  into  the  possession  of  White, 
Mrs.  Hawes  did  not  join  in  the  deed,  and  it  was  not 
customary  in  the  town  of  Canton  for  wives  of  grantors 
to  join  in  a  deed.     Mrs.  Bancroft,  after  the  death  of 
Hawes,  sued  for  the  value  of  her  dower  in  the  land. 

(n)  Roberts  v.  Baumgarten,  noN.  Y.  380.  Roberts 
brought  suit  to  recover  possession  of  certain  lots  in 
New  York  -City.  The  lots  were  formerly  in  the  bed 
of  Harlem  Mill  creek,  a  navigable  stream  where  the 
tide  ebbed  and  flowed.  The  old  deed,  under  which 
Roberts  claimed,  granted  the  land  "  including  the 
mill-stream  and  mill  and  mill-pond." 

(12)  Ocean  Grove  v.  Asbury  Park,  40  N.  J.  Eq.  447, 
was  a  case  in  which  the  plaintiffs  bored  in  their  own 


CASES  ON  REAL   PROPERTY  119 

land  for  water  over  400  feet,  and  procured  a  flow  of 
50  gallons  per  minute.  The  defendants  then  sank  a 
shaft,  8  feet  less  in  depth  than  plaintiffs',  on  land  of 
a  third  party  where  they  had  permission  to  bore. 
This  shaft  was  500  feet  from  plaintiffs'  well,  and  a 
flow  of  30  gallons  per  minute  was  obtained.  As 
soon  as  this  well  started,  plaintiffs'  flow  decreased  to 
30  gallons  per  minute.  The  defendants  proposed  to 
sink  other  shafts  still  nearer  to  plaintiffs'.  The 
plaintiffs  bring  this  action  to  recover  damages  for 
the  loss  of  the  water  from  their  well  and  to  restrain 
the  defendants  from  drilling  other  wells. 


LESSON  XXXIII 

(1)  Peck  v.  Conway,  119  Mass.  546. — This  was  a 
case  in  which  the  owner  of  a  large  tract  of  land  con- 
veyed a  part  of  it  to  a  buyer,  whom  we  will  call  B, 
with  the  reservation  in  the  deed,  "That  no  building 
is  to  be  erected  by  the  said  B,  his  heirs  or  assigns, 
upon   the   land    herein    conveyed."     The    seller   re- 
tained the  balance  of  the  land  as  his  homestead  and 
later  sold  it  to   Peck.     B  afterwards  sold  his  prop- 
erty to  Conway  without  making  any  mention  of  the 
reservation.     Peck  claims  that  Conway  has  no  right 
to  ignore  the  clause  regarding  building,  in  the  original 
deed  of  the  property  now  owned  by  Conway. 

(2)  Braman  v.  Bingham,  26  N.  Y.  483.  —  Bingham 
executed  a  deed  to  Braman  and  delivered  it  to  a  third 


120  CASES  ON  REAL   PROPERTY 

party,  who  was  to  hold  it  while  Bingham  was  absent 
on  a  journey  and  on  his  return  deliver  it  back  to  him. 
Braman  claimed  that  the  third  party  held  the  deed  in 
escrow. 

(3)  Jackson  v.  Phipps,  12  Johns.  (N.  Y.)  418.  —  In 
this  case  the  grantor  of  real  property  agreed  to  give 
the   grantee  a  deed    of   his  farm  as  security  for  a 
debt.     In    conformity    with    this     agreement,    the 
grantor,  immediately  upon  returning  to  his  home, 
executed  and  acknowledged  a  deed  and  left  it  in  the 
County  Clerk's  office  to  be  recorded.     The  grantee 
did  not  know  that  the  deed  was  made  and  left  at  the 
clerk's  office,  as  neither  he  nor  any  person  represent- 
ing him  was  present  to  receive  it.     This  action  was 
brought   to   determine  whether   there   had   been    a 
delivery  within  the  law  or  not. 

(4)  Fisher  v.  Hall,  41  N.  Y.  416. — A  conveyance 
of  real  property  was  subscribed  and  sealed  by  the 
grantor,   and  attested  by  witnesses  under  a  clause 
stating  that  it  had  been  sealed  and  delivered  in  their 
presence,  but  the  grantee  was  not  then  present  and 
remained  ignorant  of  the  deed  until  long  after  the 
death  of  the  grantor  who  continually  retained  the 
deed  in  his  possession  until  his  death.     The  question 
of  delivery  is  the  important  one  in  this  case. 

(5)  In  Haynes  v.  Aldrich,  133  N.  Y.  287,  defend- 
ant leased  certain  premises  for  a  year,  the  term  ex- 
piring May  I.     Before  the  expiration  of  the  time, 
defendant  informed  plaintiff  that  she  did  not  wish 
to  renew  her  lease  for  another  year.     May  i  was  a 


CASES  ON  REAL  PROPERTY  121 

holiday,  and  possession  was  retained  until  May  4, 
the  excuse  given  being  the  difficulty  to  get  trucks  to 
move  defendant,  also  that  on  the  third  of  May  one 
of  the  boarders  was  ill.  On  the  afternoon  of  the 
fourth  of  May  the  keys  were  tendered  plaintiff  and 
refused.  Under  these  circumstances,  what  are  the 
landlord's  rights  ? 

(6)  Lucas  v.  Coulter,  104  Ind.  81. — This  was  an 
action  for  rent  of  a  store  leased  to  defendant.     The 
defense  was  that  the  store  was  rented  for  the  manu- 
facturing   and    selling   of   musical    instruments,  and 
that  it  was  so  imperfectly  and  defectively  constructed 
that  rain  and  sand  came  through  the  roof  and  ceiling, 
causing  damage  to  the  instruments.     This  action  was 
brought  on  the  implied  warranty  that  the  premises 
were  fit  for  the  purpose  for  which  they  were  rented. 

(7)  Warner  v.   Tanner,  38  Ohio  St.  1 1 8.— Tanner 
and  one  Bartlett  executed  an  instrument  under  seal 
by  which  Tanner  leased  to  Bartlett  two  acres  of  land 
with  use  of  water  and  the  privilege  of  conducting  it 
to  a  cheese  house  to  be  erected  by  Bartlett.     Bart- 
lett agreed  to  pay  $30  per  year  for  the  premises  while 
he  should  use  them  for  the  manufacture  of  cheese, 
and,  when  the  premises  were  no  longer  to  be  used  for 
that  purpose,  they  were  to  revert  to  Tanner,  Bart- 
lett having  the  privilege  of  removing  all  buildings  and 
fixtures    erected    by    him.     Bartlett    claimed    that, 
under  this  agreement,  he  had  a  life  estate,  provided 
he  complied  with  the  conditions  of  the  contract. 

(8)  Profitt   v.    Henderson,  29  Mo.    325.  — David 


122  CASES  ON  REAL   PROPERTY 

Proffitt,  at  his  death,  was  seized  of  a  certain  tract  of 
land,  in  which  he  devised  to  his  wife  a  life  use,  and 
at  her  death  the  remainder  went  to  his  children. 
The  widow  conveyed  her  interest  to  defendant. 
This  action  was  brought  by  the  children  against 
defendant  for  waste  in  cutting  and  carrying  away 
timber  worth  $600.  It  was  shown  that  the  property 
was  timber  land  and  not  valuable  for  anything  else. 
What  are  defendant's  rights  ? 

(9)  In  re  Rausch,  35  Minn.  291.  —  Maria  Rausch, 
by  an  instrument  in  writing  which  recited  that,  in 
consideration  of  the  sum  of  $100  to  her  paid  by  her 
husband,  Henry  Rausch,  and  the  further  sum  of  $300 
agreed  to  be  paid  to  her  by  him  in  two  years,  she  did 
"  remise,  release,  convey,  and  set  over  unto  the  said 
Henry  Rausch  "  all  her  estate  or  claim  to  all  real 
and  personal  property  now  owned  or  hereafter  ac- 
quired by  said  Henry  Rausch.     She  further  agreed 
to  make  no  claim  on  him  or  his  heirs  for  any  further 
interest  in  his  property.     At  his  death  she  applied 
for  her  dower  interest. 

(10)  State  v.  Pottmeyer,  33  Ind.  402.  —  In  this  case 
a  non-navigable  stream  flowed  through  the  land  of  a 
certain  party  who  claimed  the  exclusive  right  to  the 
ice  forming  on  this  stream  in  its   natural  channel 
over  his  land.     The  question  was  also  raised,  as  to 
whether  the  person  owning  the  land  on  one  side  of 
this  stream  would  be  liable  for  any  damages,  to  the 
party  owning  the  land  on  the  opposite  side  of  the 
stream,  for  ice  taken  beyond  the  middle  of  the  stream. 


CASES   ON   REAL   PROPERTY  123 

(n)  Turner  v.  Townsend,  42  Neb.  376. — Turner 
was  the  tenant  of  property  belonging  to  Townsend 
and,  during  his  tenancy,  a  storm  broke  a  front 
window  which  was  replaced  by  the  tenant,  the  land- 
lord having  refused  to  put  in  a  new  one.  This 
action  was  brought  by  Turner  to  recover  the  price  of 
the  new  window. 

(12)  Collins  v.  Hasbrouck,  56  N.  Y.  157.  —  In  this 
case  the  tenant  made  a  contract  in  which  he  conveyed 
the  whole  of  his  unexpired  term  under  his  lease  with 
the  landlord,  but  reserved  rent  at  a  rate  and  time  of 
payment  different  from  those  in  the  original  lease, 
and  also  the  right  of  reentry  in  case  the  new  tenant 
failed  to  pay  his  rent  or  violated  any  of  the  condi- 
tions of  the  contract ;  and  also  providing  that  the 
premises  were  to  be  surrendered  to  the  first  tenant  at 
the  expiration  of  the  time.  This  action  was  brought 
to  determine  whether  there  had  been  an  assignment 
or  subletting. 


LESSON  XXXIV 

CONTRACTS  FOR  THE   BAILMENT  OF 
PERSONAL   PROPERTY 

53.  DEFINITION. 

54.  How  CREATED. 

55.  TORTIOUS  BAILMENT. 

56.  DEGREES  OF  CARE. 

57.  CLASSIFICATION. 

53.  Definition.  —  A  bailment  is  the  transfer  of 
personal  property  by  one  party  to  another  for  some 
specific  purpose  with  the  understanding  that  it  shall 
be  returned  or  redelivered  at  the  expiration  of  a 
stated  time,  or  upon  the  completion  of  the  purpose 
for  which  the  bailment  was  made.  The  person 
transferring  the  property  is  called  the  bailor  and  the 
one  to  whom  it  is  transferred,  the  bailee. 

It  is  held  that  a  bailment  is  created  even  when 
the  property  is  to  be  returned  in  a  different  form 
from  that  in  which  it  was  received.  For  example, 
wheat  to  be  returned  in  the  form  of  flour,  bran,  and 
middlings.  It  is  also  quite  generally  held  that 
where  grain  is  delivered  to  a  warehouseman  to  be 
stored  in  a  bin  with  other  grain  of  equal  grade,  and  a 
like  number  of  bushels  are  to  be  returned  at  some 

124 


BAILMENTS  125 

future  time,  the  transfer  is  a  bailment  notwithstand- 
ing the  fact  that  the  original  grain  is  not  to  be  re- 
turned to  the  bailor.  This  is  an  exception  to  the 
rule  that  the  same  thing  must  be  returned  or  re- 
delivered  in  order  to  constitute  a  bailment. 

54.  How  Created.  —  A  bailment  is  created  by  a 
contract  between  the  bailor  and  bailee,  which  should 
specify  the  purpose  for  which  the  bailment  is  created, 
the  duration  of  the  bailment,  the  use  that  is  to  be 
made  of  the  thing  bailed,  and  any  other  facts  which 
may  be  necessary  to  determine  the  respective  rights 
of  bailor  and  bailee. 

55.  Tortious   Bailment.  --  When   property   comes 
into  the  possession  of  one  not  its  owner  as  a  result 
of  theft  or  fraud,  a  tortious  bailment  results.     This 
obligation  is  riot  the  result  of  contract  but  is  imposed 
by  law  for  the  protection  of  the  owner.     A  tortious 
bailee  will  be  held  more  strictly  accountable  for  the 
care  of  the  property  than  an  ordinary  bailee.     He 
will  be  absolutely  liable  for  any  loss  that  may  occur 
while  the  property  is  in  his  possession  even  if  he  is 
not  negligent.     When  one  finds  personal  property,  he 
should  make  a  reasonable  effort  to  find  the  lawful 
owner,  and  in  case  he  fails  to  do  so,  he  may  treat  the 
property  as  his  own.     If  he  makes  no  such  effort,  he 
is  a  tortious    bailee.     When  expense    has    been  in- 
curred by  the  finder,  such  expense  may  be  recovered 
from  the  owner  before  the  property  is  surrendered  to 
him. 


126  BAILMENTS 

56.  Degrees  of  Care.  -  -  There  are  three  degrees  of 
care  :    namely,  slight,  ordinary,   and  extraordinary. 
Ordinary  care  may  be  defined  as  the  care  which  an 
ordinarily  prudent  person  would  take  of  his  own  prop- 
erty.    Less  than  this  degree  of  care  would  be  slight 
care,  and  more  would  be  extraordinary  care. 

Some  authors  mention  three  degrees  of  negligence, 
but  the  weight  of  authority  seems  to  favor  but  one 
degree  of  negligence,  and  whether  or  not  negligence 
exists  in  a  given  case  will  depend  upon  whether  the 
required  degree  of  care  has  been  given  the  property 
by  the  bailee.  Absence  of  the  required  degree  of 
care  would  be  negligence. 

57.  Classification.  -  -  The    American    classification 
of  bailments  is  as  follows  : 

(a)  Bailment  for  the  benefit  of  the  bailee. 

(b)  Bailment  for  the  benefit  of  the  bailor. 

(c)  Bailment  for  benefit  of  bailor  and  bailee. 

When  the  bailment  is  for  the  benefit  of  the  bailee 
only,  he  is  expected  to  use  the  property  with  ex- 
traordinary care.  For  example,  A  borrows  B's 
bicycle  to  ride  to  a  certain  place  and  return.  He 
must  take  the  greatest  care  possible  of  the  bicycle 
and  will  be  liable  for  its  loss,  even  though  the  loss 
resulted  from  the  slightest  negligence  on  his  part. 

Where  the  bailment  is  for  the  benefit  of  the  bailor 
only,  the  bailee  is  expected  to  take  only  slight  or 
reasonable  care  of  the  property,  and  will  be  liable 
onlv  when  he  fails  in  the  exercise  of  such  care.  For 


BAILMENTS  127 

example,  A,  who  is  to  be  out  of  the  city  for  a  few 
days,  asks  B  to  keep  his  horse  for  him  until  his  re- 
turn. B  undertakes  to  keep  the  horse.  He  must 
take  reasonable  care  of  him,  but  would  not  be  ex- 
pected to  go  to  unusual  expense  or  trouble. 

Where  the  bailment  is  for  the  benefit  of  both  bailor 
and  bailee,  such  care  as  is  taken  by  an  ordinarily  pru- 
dent person  of  his  own  property  will  be  expected 
of  the  bailee,  and  he  will  be  liable  only  for  loss  which 
results  from  the  absence  of  such  care.  For  example, 
A  takes  his  watch  to  a  jeweler  to  be  repaired.  Both 
parties  are  benefited  by  the  bailment,  and  ordinary 
care  of  the  watch  must  be  taken  by  the  jeweler. 


LESSON  XXXV 
BAILMENTS  —  CONTINUED 

58.  USE  OF  PROPERTY. 

59.  LIEN. 

60.  PLEDGE. 

61.  WARRANTIES. 

62.  LIABILITY. 

63.  TERMINATION. 

58.  Use  of  Property.  —  In  the  case  of  a  bailment 
for  the  benefit  of  the  bailor  only,  no  use  could  be 
made  of  the  property  by  the  bailee,  except  such  as 
might  be  necessary  for  the  welfare  of  the  thing  bailed. 


128  BAILMENTS 

Any  benefit  that  might  be  derived  from  the  use  of 
the  property  would  belong  to  the  bailor. 

When  the  bailment  is  one  for  the  benefit  of  the 
bailee  only,  he  may  make  such  use  of  the  property 
as  would  be  consistent  with  the  bailment  purpose. 

In  bailments  for  the  benefit  of  both  parties  the 
bailee  will  have  the  right  to  use  the  chattel  in  ac- 
cordance with  the  contract. 

59.  Lien.  —  When  property  has  been  transferred 
to  a  bailee  to  be  carried  from  one  place  to  another, 
to  have  some  service  performed  upon  it,  or  to  be 
stored,  the  bailee  has  the  right  to  retain  possession 
of  the  property  until  the  payment  for  the  service 
has    been    made.     This    right    is    called    a    lien.     If 
the  bailee  gives  up  his  possession  before  payment  is 
made,  he  loses  his  right  of  lien  and  becomes  an  or- 
dinary creditor  of  the  bailor. 

60.  Pledge.  —  Pledge  is  a  bailment  in  which   the 
bailor  transfers  personal  property  to  the  bailee  as 
security  for  the  payment  of  a  debt,  with  the  under- 
standing that  when  the  debt  shall  have  been  paid  the 
property  is  to  be  returned  to  the  bailor.     The  pos- 
session of  the  property  is  in  the  bailee  and  the  title 
remains  in  the  bailor. 

If  the  pledger  fails  to  pay  the  debt  secured  by  the 
pledge,  the  pledgee  may  sell  the  property,  at  private 
sale  if  so  provided  in  the  contract  of  pledge,  and  at 
public  sale  if  not  so  provided,  and  the  proceeds  of 
the  sale  must  be  applied  to  the  payment  of  the  debt. 


BAILMENTS  129 

If  there  is  a  surplus  after  paying  the  debt  and  costs, 
such  surplus  must  be  returned  to  the  pledgor.  In 
most  states  the  law  prescribes  how  pledged  goods 
shall  be  sold.  The  pledgee  must  give  notice  to  the 
pledgor  before  selling  the  property  which  has  been 
pledged.  This  is  intended  to  give  the  pledgor  an 
opportunity  to  redeem  the  property.  Where  no 
notice  of  sale  can  be  given  a  pledgee  owing  to  in- 
ability to  ascertain  his  whereabouts,  a  sale  should 
be  made  under  court  direction  after  the  necessary 
proceedings. 

61.  Warranties.  —  When  a  bailment  is  created  for 
the   purpose  of  having   repairs   made  to   the  thing 
bailed,  the  bailee  impliedly  warrants  that  he  has  the 
necessary  skill  to  perform  the  service.     If  loss  re- 
sults through   his  failure  to  exercise  the  degree  of 
skill  which  is  required  in  such  cases,  he  will  be  liable 
for  breach  of  warranty.     This  holds  good  even  in 
cases     of    gratuitous     bailment.     The    bailee    who 
undertakes,   without    promise   of  compensation,    to 
perform  service  upon  a  thing  belonging  to  the  bailor 
cannot  be  required  to  undertake  the  task,  but  having 
begun  the  work  he  must  exercise  skill  and  care  in  its 
performance. 

There  is  also  a  warranty  of  title  on  the  part  of 
every  bailor. 

62.  Liability.  --  In  a  mutual  benefit  bailment  the 
bailee  is  required  to  take  ordinary  care  of  the  prop- 
erty in  his  possession  and  is  liable  for  any  loss  re- 


130  BAILMENTS 

suiting  from  his  negligence.  As  has  been  stated 
in  a  previous  section,  the  degree  of  care  required  of 
the  bailee,  for  whose  sole  benefit  the  bailment  is 
created,  is  much  greater  than  that  required  in  the 
mutual  benefit  bailment.  It  has  also  been  stated 
that  the  care  required  of  a  bailee  in  the  case  of  a 
bailment  for  the  sole  benefit  of  the  bailor  is  much 
less  than  that  in  either  of  the  other  two  classes  of 
bailments.  In  all  of  these  bailments  the  bailee  will 
be  liable  for  any  loss  that  can  be  shown  to  have  re- 
sulted from  negligence  on  the  part  of  himself  or  his 
agents.  Failure  to  exercise  the  degree  of  care  re- 
quired in  any  given  bailment  will  be  considered  neg- 
ligence. It  will  be  seen  that,  when  the  loss  occurs 
as  a  result  of  inevitable  accident  or  through  natural 
causes,  the  bailee  will  not  be  liable. 

63.  Termination.  —  Since  the  bailment  relation  is 
created  by  an  implied  or  express  contract,  it  will 
terminate  in  accordance  with  the  terms  of  the  con- 
tract. In  the  absence  of  any  definite  statement 
regarding  the  termination  of  the  bailment,  it  will  be 
understood  that  the  relation  will  terminate  upon  the 
fulfillment  of  the  purpose. for  which  it  was  created. 
Return  of  the  property  to  the  bailor  or  redelivery 
upon  his  order  will  terminate  the  bailment  relation. 
A  bailment  may  come  to  an  end  also  through  agree- 
ment of  the  parties  to  it.  Any  act  by  either  party 
inconsistent  with  the  relation  of  bailor  and  bailee 
will  terminate  the  bailment. 


CASES  ON   BAILMENTS  131 

WESSON  xxxvi 

64.   CASES  ON  BAILMENTS 

(1)  Commonwealth   v.   Krause,  93  Pa.   St.  418. — 
Krause  agreed  to  purchase  two  horses  for  $150  of 
Deemer  and  to  pay  for  them  on  delivery.     At  the 
time  they  were  delivered  Krause  had  but  $25  and 
he  gave  this   amount  to  Deemer,  with  the  under- 
standing that  he,   Krause,   should   keep  the  horses 
until  the  following  Tuesday,  at  which  time  he  would 
either  pay  the  balance  or  return  the  horses,  the  title 
in  the  meantime  to  remain  in  Deemer.     No  payment 
was  made  on  Tuesday.     The  following  Thursday  the 
horses   disappeared,    having   been   sold    by    Krause. 
Deemer  offered  to  return  the  $25  and  demanded  his 
horses.     Krause  refused  to  deliver  them  back. 

(2)  Bretz  v.  Diehl,  117  Pa.  St.  589.  — William  D. 
Newman  was  a  miller  in  the  town  of  Bedford.     The 
sheriff  levied  on  eighty  or  ninety  barrels  of  flour  in 
his   mill.     It   appears   that   some  of  this   flour  was 
made  of  wheat  belonging  to  Bretz,  the  plaintiff  in 
this  case.     It  was  purchased  by  Diehl,  one  of  the 
judgment  creditors,  at  the  time  of  the  sheriff's  sale. 
This   action  was   brought  by  .  Bretz  to  recover  the 
value  of  the  flour  from  Diehl,  on  the  ground  that  it 
did  not  belong  to  Newman  and  should  not,  there- 
fore, have  been  levied  upon.     It  appears  from  the 
evidence  in  the  case  that  when  Bretz  took  the  wheat 
to  the  mill,  he  received  from  Newman  a  receipt  stating 


132  CASES  ON   BAILMENTS 

that  he,  Newman,  had  received  a  certain  number  of 
bushels  of  wheat  which  was  to  be  put  into  a  common 
bin  in  the  mill  and  out  of  which  Newman  was  to 
grind  flour  to  fill  his  orders.  It  was  further  under- 
stood that  Bretz  was  entitled  to  the  flour,  bran,  and 
middlings  from  wheat  of  similar  grade,  whenever  he 
chose  to  call  for  it,  but  it  was  not  understood  that 
his  flour,  bran,  and  middlings  were  to  be  made  from 
the  identical  wheat  that  he  delivered  at  the  mill. 

(3)  Foster  v.  Essex  Bank,  17  Mass.  479.  —  Foster 
left  $50,000  in  gold  at  the  Essex  Bank  for  safe-keep- 
ing.    No  special  payment  was  made  for  this  service. 
The  cask  containing  the  gold  was  weighed  in  the 
presence    of    the    president    and    cashier,    but    the 
directors  had  no  knowledge  of  the  transaction.     It 
was  the  custom  of  the  bank,   however,  to  receive 
such   goods    for   safe-keeping.     No   special    account 
was  kept  by  the  bank  for  such  transactions.     The 
cashier  and  chief  clerk  of  the  bank  stole  all  of  this 
gold  and  much  of  the  money  that  belonged  to  the 
bank.     It  was  shown  at  the  trial  that  the  books  at 
the  bank  had  been  falsified  for  over  two  years  and 
that  during  all  that  time  they  had  not  been  posted. 
This  action  was  brought  by  the  executors  of  Foster 
to  recover  the  amount  from  the  Essex  Bank. 

(4)  Stearns  v.  Marsh,  4  Denio  (N.  Y.)  227.  —  Marsh 
owed  Stearns  a  sum  of  money  which  was  payable  on 
the  8th  day  of  November,  1837.     To  secure  payment 
of  the  obligation,   Marsh   delivered  to  Stearns  ten 
cases  of  boots,  to  be  held  as  a  pledge.     On  the  I5th 


CASES   ON   BAILMENTS  133 

day  of  November,  Stearns  sold  the  boots  at  public 
sale  in  Boston.  He  published  a  notice  of  the  sale 
in  the  newspapers  in  that  city,  but  gave  no  notice 
of  the  sale  to  Marsh.  No  opportunity  was  given  to 
Marsh  to  redeem  the  pledge.  The  net  proceeds  of 
the  sale  were  insufficient  to  pay  the  entire  debt,  but 
they  were  applied  to  the  payment  of  the  debt  by  the 
plaintiffs  without  the  assent  of  Marsh,  the  defendant. 
This  action  was  brought  to  recover  the  balance. 

(5)  Small  v.  Robinson,  69  Me.  425.  —  Small  owned  a 
hack  which  he  turned  over  to  one  Staples  in  accord- 
ance with  the  terms  of  a  contract  which  provided 
that  Staples  was  to  buy  it.     The  sale  had  not  yet 
been  completed.     Robinson  was  a  carriage  maker,  and 
it  was  shown  that  he  was  aware  of  the  fact  that  the 
hack  was  owned  by  Small  but  that  Staples  had  agreed 
to  buy  it.     Staples  took  the  hack  to  Robinson  to  be 
repaired,  and  after  making  the  repairs,  Robinson  re- 
fused to  permit  Small  to  take  it  away  until  the  re- 
pairs had  been  paid  for.     This  action  was  brought  by 
Small  to  compel  Robinson  to  deliver  the  carriage  to 
him. 

(6)  Sensenbrenner  v.  Mathews,  48  Wis.  250.  —  Max- 
well was  a  buggy  painter  and  occupied  a  part  of  a 
building  in  which  Sensenbrenner  conducted  a  black- 
smith shop.     Maxwell  took  a  buggy  upon  which  the 
woodwork  had  been  completed  to  Sensenbrenner  to 
have  the  ironwork  done.     After  the  ironwork  was 
completed,  the  buggy  was  turned  over  to  Maxwell, 
who  intended  to  paint  it  and  sell  it.     Sensenbrenner 


134  CASES  ON   BAILMENTS 

notified  Maxwell  not  to  dispose  of  it  until  the  iron- 
work had  been  paid  for.  Maxwell  disregarded  this 
order  and  sold  it  to  Henry.  Sensenbrenner  refused 
to  allow  Henry  to  take  it  away.  Henry  secured  a 
writ  of  replevin  and  Mathews,  the  sheriff,  took  the 
buggy  while  Sensenbrenner  was  absent. 

(7)  Pulliam  v.  Burlingame,  81  Mo.  in.  —  Burlin- 
game  went  to  Pulliam  and  borrowed  two  mules  which 
were  in  the  rightful  possession  of  Pulliam.  Later, 
Pulliam  demanded  that  the  mules  be  returned,  but 
Burlingame  refused  to  return  them,  on  the  ground 
that  his  wife,  who  was  Pulliam's  sister,  owned  half 
interest  in  the  mules,  and  that  he  had  taken  them 
from  Pulliam  and  was  holding  them  as  her  agent. 
This  action  was  brought  to  recover  possession  of  the 
mules. 

LESSON  XXXVII 

(i)  Esmay  v.  Fanning,  9  Barb.  (N.  Y.)  176.  —  In 
June,  Esmay  had  a  carriage  in  storage  at  the  livery 
stable  of  George  L.  Crocker.  From  time  to  time, 
he  loaned  it  to  Fanning.  About  the  first  of  Novem- 
ber of  the  same  year,  Fanning  had  the  carriage  and 
was  asked  by  Esmay  to  return  it  to  him.  Instead 
of  returning  it  to  him,  as  requested,  Fanning  took  the 
carriage  to  the  livery  stable  of  Crocker  and  left  it. 
This  action  was  brought  by  Esmay  for  the  value  of 
the  carriage,  on  the  ground  that  it  had  not  been  re- 
delivered  in  accordance  with  the  request  of  the 
plaintiff. 


CASES  ON   BAILMENTS  135 

(2)  Wentworth     v.     McDuffie,     48   N.  H.  402.- 
McDuffie  hired  a  horse  of  Wentworth  to  drive  from 
Rochester  to  Dover.     The  horse  was  driven  by  Mc- 
Duffie  to  Hoyt's,  two  miles  from  the  point  agreed 
upon.     Upon  his  return  to  Rochester,  it  was  found 
that  the  horse  was  exhausted  and  sick,  and  he  died 
about  a  half  hour  later.     This  action  was  brought 
against  McDuffie  for  the  value  of  the  horse. 

(3)  Claflin  v.  Meyer,  75  N.  Y.  260. — In  this  case 
the  plaintiff  delivered  to  the  defendant,  who  was  a 
warehouseman,    certain    goods    to    be    stored    for    a 
certain  consideration  in  money.     When  the  plaintiff 
asked  the  defendant  for  the  goods  so  stored,  he  was 
told  by  the  defendant  that  the  goods  could  not  be 
returned  as  they  had  been  stolen.     This  action  was 
brought   for  the  value  of  the  goods.     The  plaintiff 
made  no  attempt  to  prove  that  the  warehouseman 
was  negligent. 

(4)  Hunt  v.    Wyman,  100  Mass.  198. — This  was 
an  action  for  the  price  of  a  horse.     Plaintiff  had  the 
horse  for  sale  and  agreed  to  let  defendant  take  it 
and  try  it ;  if  he  did  not  like  it,  he  was  to  return  it,  on 
the  night  of  the  day  he  took  it,  in  as  good  condition 
as  he  got  it.     Almost  as  soon  as  the  horse  was  de- 
livered to  defendant's  servant,  it  escaped  from  him, 
without  the  servant's  fault,  and  was  injured  so  that 
the  defendant  could  not  try  it.     The  horse  was  not 
returned  in  the  time  stated. 

(5)  Fisher  v.  Kyle9  27  Mich.  454.  — The  defendant 
hired  a  horse  of  the  plaintiff  to  drive  to  a  certain 


136  CASES  ON   BAILMENTS 

place.  He  drove  beyond  the  place  stated  and  the 
horse  fell  dead  while  being  driven.  It  was  shown 
that  there  was  no  negligence  on  the  part  of  the  de- 
fendant. This  action  was  brought  to  recover  the 
value  of  the  horse. 

(6)  Smith  v.  Meegan,  22  Mo.  150. — The  defend- 
ant   took    plaintiff's    boat   to  make    certain    repairs 
upon     it.     After     making    the     repairs,     defendant 
launched  it  in  the  river  at  a  time  and  under  circum- 
stances  of  great   danger,   which   should   have   been 
foreseen  and  which  resulted  in  the  destruction  of  the 
boat.     This  action  was  brought  to  recover  its  value. 

(7)  Tucker  v.  Taylor,  53  Ind.  93. — The  defendant 
was   a   mechanic   who   received    a  wagon   from   the 
plaintiff  to   repair.     It   was    agreed    between   them 
that  the  defendant  should  receive  for  his  labor  the 
use  of  the  wagon  and  a  horse  with  which  to  take  a 
certain  journey.     After  the   work   was    completed, 
the  defendant  permitted  the  owner  to  take  the  wagon, 
with  the  understanding  that  it  was  to  be  returned 
at  a  later  date,  with  a  horse,  so  that  the  defendant 
could  make  the  journey.     The  owner  having  failed 
to  furnish  the  horse  and  wagon,  the  defendant  as- 
serted his  lien  and  sold  the  wagon.     This  action  was 
brought  by  the  original  owner  to  recover  the  wagon. 


LESSON  XXXVIII 

EXCEPTIONAL   CONTRACTS  OF   BAILMENT 
INNKEEPERS 

65.  DEFINITION. 

66.  GUEST. 

67.  LIABILITY. 

68.  LIEN. 

65.  Definition.  —  An  innkeeper  is  one  who  makes 
a  continuing  offer  to  the  public  to  furnish  entertain- 
ment in  the  form  of  food  and  lodging  for  a  compen- 
sation. He  differs  from  the  boarding-house  keeper 
in  that  he  must  receive  any  one  who  may  ask  for 
entertainment,  except  one  who  would  injure  his 
business,  or  one  who  applies  after  all  available  ac- 
commodations have  been  spoken  for,  while  the 
boarding-house  keeper  takes  only  those  with  whom 
he  may  care  to  contract.  It  has  been  held  that 
the  operators  of  Pullman  cars  cannot  be  held  liable 
as  innkeepers,  for  though  the  service  is  similar  to 
that  rendered  by  innkeepers,  the  conditions  under 
which  this  service  is  rendered  are  very  different  from 
those  under  which  the  innkeeper  conducts  his  busi- 
ness, and  the  chance  of  property  loss  may  be  very 
much  greater. 

137 


138  EXCEPTIONAL   BAILMENTS 

66.  Guest.  —  One  who  partakes  of  the  hospitality 
offered  by  an  innkeeper  is  called  a  guest.     This  does 
not  apply  to  one  who  has  been  invited  to  accept  en- 
tertainment without   compensation.     A   person   be- 
comes a  guest  immediately  upon  turning  his  baggage 
over  to  a  hotel  porter  at  a  railway  station,  or  at  any 
other  place,  and  continues  as  a  guest  until  he  has 
permanently  withdrawn  his  baggage  from  the  cus- 
tody of  the  innkeeper  or  his  servants,  or  until  he  has 
turned  his  baggage  over  to  the  innkeeper  to  be  stored 
and    has   left   the   hotel.     He   may   leave   the   hotel 
temporarily  and  still  continue  a  guest  providing  he 
is  paying  for  his  room. 

67.  Liability. -- The  'innkeeper    is    liable    for    all 
losses  of  baggage  sustained  by  guests,  except  those 
which  occur  through  carelessness  of  the  guest  or  by 
Act  of  God.     His  liability  covers  loss  through  dis- 
honesty of  his  servants  or  other  guests.     Some  states 
have  passed   a  statute  modifying  the  common  law 
regarding  the  liability  of  the  innkeeper  for  the  bag- 
gage of  his  guests,  on  the  ground  that  the  common 
law  rule,  which  is   here   stated,  is   too   severe  when 
modern  methods  of  conducting  a  hotel  are  taken  into 
consideration. 

The  innkeeper  may  make  reasonable  requirements 
regarding  the  care  of  his  guests'  baggage,  and  he 
usually  gives  notice  to  the  guest  that  he  will  be  re- 
sponsible for  valuables  only  when  they  have  been 
given  him  personally  to  be  cared  for  in  the  office 
where  facilities  are  provided  for  their  safe-keeping. 


CASES  —  INNKEEPERS  139 

Such  a  notice  must  be  posted  in  a  conspicuous  place, 
and  it  must  be  reasonably  certain  that  it  has  been 
brought  home  to  the  guest.  All  property  of  the 
guest  that  is  necessary  or  proper  may  be  kept  in 
his  room,  but  he  must  comply  with  all  reasonable 
regulations  limiting  the  innkeeper's  liability  for 
valuables. 

68.  Lien.  —  Since  the  innkeeper  is  generally  re- 
quired to  receive  any  one  who  asks  for  entertainment, 
he  may  exact  payment  in  advance,  or  he  may  claim  a 
lien  for  his  charges  on  the  property  which  his  guest 
brings  to  the  inn.  His  lien  is  like  that  of  any  bailee, 
in  that  it  continues  only  so  long  as  he  keeps  the  prop- 
erty in  his  possession.  If  he  surrenders  it  to  the 
guest,  he  loses  his  right  of  lien.  The  innkeeper  is 
liable  only  as  any  other  bailee  for  the  baggage  left 
with  him  after  the  owner  has  ceased  to  be  a  guest  at 
the  hotel. 

LESSON  XXXIX 

69.   CASES  ON  THE  LAW  OF  INNKEEPERS 

(i)  Fay  v.  Pacific  Improvement  Co.,  93  Cal.  253.  - 
The  improvement  company  was  the  .owner  of  the 
Hotel  Del  Monte  and  the  plaintiff  who,  while  a  guest 
of  the  inn,  lost  jewelry,  clothing,  and  other  personal 
property  needed  for  her  personal  use,  in  a  fire  which 
destroyed  the  hotel.  The  defendant  claimed  that,  at 
the  time  the  plaintiff  registered  at  his  hotel,  she  had 
asked  for  rates  and  had  been  quoted  a  special  price 


140  CASES  —  INNKEEPERS 

per  week  for  her  entertainment,  and  was,  therefore, 
a  boarder  and  not  a  guest.  It  was  further  claimed 
by  the  hotel  owner  that  the  value  of  the  jewelry  lost 
could  not  be  recovered.  The  cause  of  the  fire  was 
probably  the  imperfection  of  the  batteries  which 
supplied  the  bells  with  electricity. 

(2)  Kisten  v.  Hildebrand,  9  B.  Monroe  (Ky.)  72.  - 
In    this    case    the    defendant,    Hildebrand,    kept    a 
boarding  house   and   occasionally  entertained  tran- 
sients.    The  plaintiff  was   a  regular  boarder.     The 
plaintiff's  trunk  was  broken  into  and  a  large  sum  of 
money   stolen.     This    action   was    brought   to   hold 
Hildebrand  liable  as  an  innkeeper. 

(3)  De  Waldv.  Bowell,  2  Ind.  App.  303.  —  Bowell 
was  the  owner  of  the  Ross  House,  and  Caswell,  a 
traveling  salesman  for  De  Wald  &  Co.,  became  a 
guest  at  the  Ross  House,  giving  his  satchel  containing 
$252  to  a  servant  of  the  inn.     The  satchel  was  placed 
in  a  coat  room  adjoining  the  office.     When  Caswell 
called   for  the  satchel,   he  found  that  it  had   been 
opened    and   the    money    stolen.     This    action   was 
brought  to  recover  the  amount  so  lost. 

(4)  Sibleyv.  Aldrich,  a  N.  H.  553.  —  Sibley,  while 
a  guest  at  an  inn  belonging  to  Aldrich,  delivered  his 
horse  to  Aldrich  to  care  for  in  his  stable.     The  horse 
was  kicked  and  injured  by  a  horse  belonging  to  an- 
other traveler,  but  without  negligence  on  the  part  of 
Aldrich  or  his  servants.     This  action  was  brought  to 
recover  damages  for  the  loss  of  the  horse,  which  died 
because  of  his  injuries. 


CASES  —  INNKEEPERS  141 

(5)  Hulett  v.  Swift,  33  N.  Y.  571.  —  Plaintiff  was  a 
guest   at   defendant's  hotel,  and  while  he  was  there 
his  goods  were  destroyed  by  fire,  the  cause  of  which 
was  unknown.     It  was  proven  that  the  plaintiff  was 
in  no  way  negligent. 

(6)  Read  v.   Amidon,  41    Vt.   15.  —  Read   and  his 
father    drove    to    Amidon's    hotel,   had  their    horse 
cared   for,  and   dined  at  the  hotel,  remaining  until 
evening,  when  they  left  for  home.     Plaintiff,  having 
sustained  a  certain  loss  at  the  hotel,  brought  this 
action    to    recover    damages.      The   only    point   in- 
volved is  as  to  whether  plaintiff  was  a  guest  within 
the  legal  meaning  of  that  term. 

(7)  Pullman  Palace  Car  Co.  v.  Smith,  73  111.  360.  - 
Smith  purchased  a  ticket  on  the  Palace  Car  Com- 
pany's car  and,  while  asleep  on  his  trip,  his  money 
was  taken  from  his  vest  pocket.     This  action  was 
brought  against  the  company  as  innkeepers. 

(8)  Rockwell  v.  Proctor,  39  Ga.  105.  —  Defendant 
was  an  innkeeper,  and  plaintiff  went  to  his  hotel  and, 
while  there,  gave  his  coat  to  a  negro  who  was    in 
charge  of  the  check  room.     The  coat  was  lost  and 
this  action  was  brought  to  recover  its  value. 

(9)  Sasseen  v.  Clark,  37  Ga.  242. — The  defendant 
sent  his  porter  to  meet  the  trains   and  to  receive 
baggage  of  persons  traveling  and  desiring  to  stop  at 
his  hotel.     Plaintiff's  baggage  was  lost  after  he  gave 
it  to  Clark's  porter.     It  was  not  shown  that  it  ever 
reached  the  hotel.     This  action  was  brought  to  re- 
cover its  value. 


LESSON  XL 

EXCEPTIONAL    CONTRACTS    OF    BAILMENT  - 
CONTINUED 

COMMON  CARRIERS 

70.  DEFINITION. 

71.  CHARGES. 

72.  LIEN. 

73.  LIABILITY. 

74.  DELIVERY. 

75.  CARRIERS  OF  PASSENGERS. 

70.  Definition.  —  A    common    carrier  is   one  who 
holds  out  to  the  public  a  continuing  offer  to  carry 
goods    between    regularly    designated    points   for   a 
compensation.     He    must    carry    for    any    one   who 
offers  goods  for  carriage,  so  far  as  his  facilities  will 
permit.     Explosives  and  other  things  that  would  in- 
volve unusual  risk  may  be  refused  by  the  common 
carrier.     Truckmen    and   cartmen   are   not   common 
carriers,  as  they  hold  out  an  offer  to  carry  for  only 
those  with   whom   they   choose  to   contract.     Rail- 
way and  express  companies  are  common  carriers. 

71.  Charges.  —  Under  the  common  law,  a  common 
carrier  could   make   any   reasonable   charge   for  his 

142 


COMMON   CARRIERS  143 

service.  He  could  make  different  rates  for  different 
shippers,  even  for  the  same  service,  providing  the 
rate  in  no  case  was  unreasonable.  Under  modern 
conditions,  it  has  become  necessary  to  regulate,  in 
some  degree,  the  matter  of  freight  rates.  In  1887  the. 
Interstate  Commerce  Law  was  passed  by  Congress. 
It  was  the  purpose  of  this  law  to  regulate  the  com- 
merce between  the  states,  in  the  interest  of  all 
shippers,  and  it  applies  to  all  common  carriers  who  do 
business  in  more  than  one  state.  Among  its  provi- 
sions are  the  following : 

No  discrimination  shall  be  made  between  large  and 
small  or  between  regular  and  occasional  shippers. 

No  charges  shall  be  unjust  or  unreasonable. 

Proportionate  charges  shall  be  made  for  long  and 
short  distances.  * 

A  schedule  of  rates  shall  be  published  and  filed 
with  commissioners  who  are  appointed  to  see  to  the 
enforcement  of  the  law. 

No  common  carrier  shall  enter  into  any  combina- 
tion or  agreement  that  shall  in  any  way  interfere 
with  the  carnage  of  freight  from  one  point  to  another. 

Since  nearly  all  railroads  and  express  companies  do 
interstate  business,  this  act  applies  to  practically 
all  such  common  carriers. 

72.  Lien.  --  The  carrier  does  not  ordinarily  exact 
payment  before  the  goods  are  ready  for  delivery  to 
the  consignee,  although  he  may  require  payment  in 
advance  if  he  wishes.  He  has  a  bailee's  lien  on  the 
goods  to  secure  the  payment  of  charges.  The  shipper 


144  EXCEPTIONAL   BAILMENTS 

is  responsible  to  the  carrier  for  the  freight.  The  con- 
signee is  liable  only  when  he  expressly  agrees  to 
assume  the  liability.  If  the  common  carrier  de- 
livers the  goods  to  the  consignee  or  any  person 
.authorized  by  him  to  receive  them,  without  first 
securing  the  freight  charges,  his  right  of  lien  is  lost. 

73.  Liability  of  the  Carrier.  -  -  The  common  car- 
rier was  liable,  under  the  common  law,  for  all  loss  or 
damage  to  the  goods  while  in  his  possession  as  carrier, 
except  loss  or  damage  resulting  from  an  Act  of  God, 
or  of  the  public  enemy,  or  an  inherent  quality  in  the 
goods  shipped,  or  through  the  carelessness  of  the 
shipper.  Under  the  head  of  Act  of  God  are  in- 
cluded storms  and  other  weather  conditions,  such  as 
lightning,  flood,  etc.  By  public  enemy  is  meant  an 
enemy*of  the  public  as  a  whole.  This  does  not  apply 
to  a  mob  of  strikers,  or  to  any  other  of  the  ordinary 
disturbers  of  the  peace. 

The  severe  liability  of  the  common  carrier  has 
been  diminished  by  statutes.  He  is  not  liable  for 
loss  occurring  through  the  negligence  of  the  shipper 
in  preparing  the  goods  for  shipment,  nor  is  he  liable 
for  loss  which  is  due  to  fraud  on  the  part  of  the 
shipper  in  concealing  the  identity  of  the  goods 
shipped.  It  is  necessary  for  the  carrier  to  know  the 
general  nature  of  the  goods  in  order  that  he  may  take 
such  care  of  them  as  would  be  required  to  prevent 
loss.  This  is  only  fair  to  him  since  an  exceptional 
liability  is  imposed  upon  him  by  law. 

The  carrier  is  not  liable  for  loss  occurring  because 


COMMON  CARRIERS  145 

of  some  inherent  quality  in  the  goods.  This  applies 
where  animals  are  shipped  by  freight  and  do  them- 
selves injury,  or  where  fruits  decay  during  the  time 
they  are  in  the  custody  of  the  carrier,  without  fault 
or  negligence  on  his  part. 

The  carrier  is  not  liable  for  loss  of  the  goods 
through  an  act  of  public  authority.  When  the 
goods  are  seized  by  due  process  of  law,  the  carrier  is 
not  liable  for  failure  to  deliver  in  accordance  with  his 
contract.  He  must  know  at  his  peril,  however,  that 
the  officer  who  demands  the  goods  has  the  legal 
right  to  have  them. 

The  carrier  may  further  limit  his  liability  by  con- 
tract entered  into  at  the  time  the  shipment  is  ac- 
cepted for  transportation.  Any  reasonable  limit  as 
to  amount  for  which  he  will  be  liable  will  be  held 
valid.  He  may  not,  however,  even  by  contract,  free 
himself  from  liability  for  loss  occurring  through 
carelessness  or  fraud  on  the  part  of  himself  or  any  of 
his  employees,  except  in  states  where  a  statute  has 
been  passed  changing  this  common  law  rule.  In 
New  York  State  the  carrier  may,  by  contract,  free 
himself  from  liability  for  the  negligence  of  his  em- 
ployees. He  must  take  the  best  possible  care  of  the 
goods  and  carry  them  safely  to  their  destination. 

The  carrier's  liability  begins  as  soon  as  he  or  his 
employee  accepts  the  goods  for  transportation.  In 
the  case  of  express  companies,  liability  begins  when 
goods  are  delivered  to  the  driver  on  the  collection 
express  wagons  sent  out  by  the  company,  and  con- 


146  EXCEPTIONAL   BAILMENTS 

tinues  until  goods  are  delivered  to  the  consignee  in  all 
places  where  a  delivery  service  is  maintained. 

When  the  goods  are  accepted  by  a  common  carrier 
to  be  transported  to  a  certain  point  and  there  to  be 
delivered  to  a  connecting  carrier,  the  liability  of  the 
initial  carrier  ceases  as  soon  as  delivery  of  the  goods 
in  good  condition  is  made  to  the  connecting  carrier, 
unless  the  initial  carrier  has  contracted  to  carry  the 
goods  to  their  final  destination,  in  which  case  each 
of  the  connecting  lines  will  be  considered  an  agent  of 
the  initial  carrier. 

When  goods  are  lost,  the  shipper  has  a  prima  facie 
case  against  the  initial  carrier  who  must  prove  that 
the  goods  were  delivered  to  the  next  carrier  in  good 
condition. 

74.  Delivery.  —  It  is  the  duty  of  the  carrier  not 
only  to  carry  the  goods  safely  to  their  destination, 
but  also  to  deliver  them  to  the  consignee,  his  agent, 
or  assignee.  He  should  be  required  to  give  the 
shipper  a  receipt,  called  a  bill  of  lading,  containing 
a  list  of  the  goods  received  and  the  terms  of  the  con- 
tract for  transportation.  A  duplicate  of  this  receipt 
is  sent  to  the  consignee,  who  generally  is  required  by 
the  carrier  to  surrender  it  upon  receipt  of  the  goods. 
The  carrier  must  know  the  identity  of  the  party  to 
whom  he  delivers,  as  he  insures  delivery  to  the  desig- 
nated consignee. 

The  extreme  liability  of  the  carrier  has  been  held 
in  some  states  to  cease  as  soon  as  the  goods  have  been 
stored  in  the  warehouse  at  their  destination.  From 


COMMON   CARRIERS  147 

that  time  to  the  time  they  are  taken  by  the  consignee, 
the  carrier  is  liable  only  as  a  warehouseman.  He  is 
liable  only  for  loss  that  is  caused  by  negligence  of 
himself  or  his  employees.  In  other  states  it  is  held 
that  the  extreme  liability  of  the  carrier  continues 
until  the  consignee  has  been  notified  and  has  had  a 
reasonable  opportunity  to  take  the  goods  away  from 
the  warehouse.  Express  companies  are  required  to 
deliver  to  the  residence  or  place  of  business  of  the 
consignee  in  cities  or  villages  where  they  maintain  a 
delivery  service. 

75.  Carriers  of  Passengers.  —  Common  carriers  of 
passengers  must  exercise  great  care  in  the  conduct  of 
their  business.  They  must  accept  for  transportation 
any  person  who  desires  their  service,  except  intoxi- 
cated persons  or  those  who  would  in  any  way  inter- 
fere with  the  business  of  the  carrier.  Persons  who 
are  in  poor  health,  who  are  for  any  reason  unable  to 
care  for  themselves,  need  not  be  accepted  by  the 
carrier,  except  when  accompanied  by  some  one  whose 
duty  it  is  to  look  after  them.  A  person  becomes  a 
passenger,  in  a  legal  sense,  as  soon  as  he  enters  upon 
the  property  of  the  carrier  for  the  purpose  of  being 
carried  from  one  place  to  another,  and  continues  to 
be  a  passenger  until  he  has  departed  from  the  prop- 
erty of  the  carrier  at  his  destination.  The  common 
carrier  may  make  suitable  rules  for  the  conduct  of 
his  business  and  may  require  passengers  to  purchase 
tickets  in  advance  or  to  pay  a  cash  fare,  when  called 
upon  to  do  so  by  the  official  in  charge  of  the  train. 


148  CASES  —  COMMON   CARRIERS 

The  tickets  issued  by  the  railway  companies  usually 
contain  a  contract  limiting  the  company's  liability 
for  the  loss  of  baggage  to  a  certain  amount.  By 
baggage  is  meant  the  personal  effects  of  the  traveler 
that  are  necessary  for  his  convenience  and  comfort 
while  traveling.  Articles  for  members  of  his  im- 
mediate family  are  considered  baggage,  but  any 
articles  for  persons  outside  of  his  family  are  not  so 
considered.  The  carrier's  liability  for  loss  of  baggage 
to  the  extent  of  the  amount  stated  on  the  ticket  is 
the  same  as  that  of  the  carrier  of  any  other  property 
received  for  transportation.  Common  carriers  are 
insurers  of  the  goods  except  in  cases  where  their 
liability  is  limited  by  contract. 


LESSON  XLI 

76.   CASES  ON  THE  LAW  RELATING  TO  COMMON 
CARRIERS 

(i)  Chapman  v.  Fish,  2  Ga.  349.— William  Fish  re- 
ceived from  the  agent  of  the  Central  R.  R.  Co.  cer- 
tain packages  of  goods  belonging  to  Chapman  which 
by  a  special  contract  he,  Fish,  promised  to  deliver  in 
good  order  and  condition  at  Macon,  unavoidable 
accidents  excepted.  In  attempting  to  cross  a 
stream,  his  wagon  was  upset  and  the  goods  were 
damaged.  Chapman  brought  an  action  against  him 
to  recover  for  the  loss  which  resulted  from  the  in- 


CASES  —  COMMON  CARRIERS  149 

jury  to  the  goods.  Two  questions  involved  in  the 
case  are  : 

First,  Was  Fish  a  common  carrier,  and  if  so  was  he 
liable  ? 

Second,  If  he  was  not  a  common  carrier,  was  he 
liable  for  loss  under  his  contract  ? 

(2)  Scofield  v.  Railway  Co.,  43  Ohio  St.  571 .  — A  rail- 
way company  carried  freight  for  one  of  its  customers 
at  a  rate  very  much  less  than  the  rate  charged  Sco- 
field for  the  same  services.     This  discrimination  was 
injurious  to  the  legitimate  business  of  Scofield.     This 
action  was  brought  against  the  railway  company  to 
prevent  the  collection  of  the  higher  freight  rates  re- 
ferred to. 

(3)  Briggs  v.  Boston  &  Lowell  R.  R.  Co.,  6  Allen 
(Mass.),  246.  —  Briggs,  whose  place  of  business  was  at 
Racine,    Wis.,    delivered    flour   to   the    Racine    and 
Mississippi   R.   R.  Co.,  taking  from  their  agents  a 
receipt  in  which  they  agreed  to  forward  and  deliver 
the  flour  to  Franklin  E.  Foster  at  Williamstown  in 
Massachusetts.     By  a  mistake  of  the  agents  of  the 
company,  the  flour  was  billed  to  Wilmington,  where 
there  is  a  freight  station  on  the  road  of  the  defend- 
ants.     In  due    time    it  was    placed   in    the   freight 
house  of  the  defendant  road  at  Wilmington,  where 
the  company  could  find  no    Franklin   E.   Foster  to 
whom  to  deliver  it.      After  two    months  the  flour 
was  sold   by  the  railroad  company    and  the   funds 
retained    by   them.      This    action    was    brought   to 
recover  the  value  of  the  flour. 


150  CASES  — COMMON  CARRIERS 

(4)  Morganton    Manufacturing    Co.   v.    River   and 
Charleston  Ry.  Co.,  121  N.  C.   514. — A  box  of  plate 
glass  was  shipped  by  the  plaintiff  company  from  New 
York   City   to   Marion.     In   the   regular   course   of 
transportation    the    shipment    passed    over    several 
railroads,  including  the  defendant  railway  company, 
which  was  the  terminal  carrier.     When  the  shipment 
was  received  in  Marion,  it  was  found  to  be  damaged. 
Evidence  was  given  which  proved  that  the  defendant 
railway  company  had  received  the  glass  in  good  con- 
dition.    This   action  was  brought  to  recover  dam- 
ages, and  the  railway  company  refused  to  pay  until 
the  plaintiff  could  prove  that  the  damages  occurred 
on  its  road. 

(5)  Pingree  v.  Detroit,  Lansing  &  Northern  R.  R. 
Co.,  66  Mich.   143. — The  plaintiff,  Pingree,  shipped 
goods  from  Edmore  via  the  defendant  railroad  com- 
pany directed  to  Detroit,  and  took  the  usual  bill  of 
lading.     While  the  goods  were  in  Stanton  en  route, 
they  were  taken  from  the  railroad  company,  by  the 
sheriff,  on  an  attachment  against   the  parties  from 
whom  Pingree  had  bought  the  goods.     This  action 
was  brought  against  the  railroad  company  for  their 
failure  to  deliver  the  goods  at  Detroit. 

(6)  Steele  v,  Me  Tyer,  3 1  Ala.  667.  —  Defendant  was 
a  common   carrier    running   a   flatboat    to    Mobile. 
Plaintiff  shipped  15  bales  of  cotton  on  defendant's 
boat.     The  boat  was  wrecked  by  running  into  a  log. 
This  action  was  brought  to  recover  the  value  of  the 
cotton, 


CASES  — COMMON   CARRIERS  151 

(7)  Woosterv.  Tarr,  8  Allen  (Mass.),  270.  —  Defend- 
ant, Tarr,  shipped  mackerel  at  Halifax  upon  plain- 
tiff's vessel.     In  the  bill  of  lading  it  was  specified 
that  they  be  delivered  in  Boston  "  Unto  Howe  &  Co., 
or  to  their  assigns,  he  or  they  paying  freight  for  said 
goods."     They  were  delivered  to  parties  to  whom 
Howe  &  Co.  had  sold  and,  as  plaintiff  could  not  collect 
freight  from  Howe  &  Co.,  who  were  insolvent,  he 
brought   this    action    against   Tarr   for   the    unpaid 
freight. 

(8)  Satterlee  v.  Groat,  i  Wend.  (N.  Y.)  272.  —  De- 
fendant was  for  some  time  a  common  carrier  between 
Schenectady  and  Albany,  but  had  sold  out  all  of  his 
teams  but  one,  which  he  used  on  his  farm,  and  for  a 
year  or  more  entirely  gave  up  the  business  of  carry- 
ing.    One  Dows  then  engaged   him  to  bring  some 
loads  for  him  from  Albany  to  Schenectady.     Groat 
sent  his  servant  to  bring  these  loads,  expressly  in- 
structing him  not  to  carry  for  any  one  else.     When 
the  servant  went  for  the  third  load,  it  was  not  ready, 
and  he,  contrary  to  his  instructions,  took  a  load  from 
plaintiff  to  be  delivered  to  Frankfort.     On  the  way, 
one  box  was  broken  into  and  the  contents  stolen. 
The  servant  was  afterwards  convicted  of  the  theft. 
This  action  was  brought  against  Groat,  as  a  common 
carrier,  for  the  loss  due  to  an  act  of  his  servant. 

(9)  Johnson  v.  The  Midland  Railway  Co.,  4  Exch. 
(Eng.)    367.  —  The    railway     company     refused     to 
transport   five  tons  of  coal   for  the   plaintiff.     The 
defendant  railway  company  never  carried  coal  and 


152  CASES —  COMMON  CARRIERS 

did  not  hold  itself  out  for  any  such  business.  It 
was  proven  that  its  equipment  was  designed  for 
passenger  service. 

(10)  Klauberv.  American  Express  Co. ,21  Wis.2i.— 
Plaintiff  shipped  some  clothing  by  the  defendant 
express  company.  The  clothing  was  not  packed 
so  as  to  be  safe  from  damage  by  rain.  This  fact  was 
apparent  to  the  defendant  company  when  they  ac- 
cepted the  goods.  While  the  clothing  was  being 
transported  by  defendant,  it  was  damaged  by  rain. 
This  action  was  brought  to  recover  the  damage. 

(i  I )  Perkins  v.  American  Express  Co., 42  111.  458.  — 
A  package  containing  a  wreath  made  partially  of 
glass  was  given  by  plaintiff  to  the  defendant  com- 
pany for  transportation.  The  company  was  not 
notified  of  the  nature  of  the  goods  shipped.  During 
the  transportation  the  goods  were  damaged.  This 
action  was  brought  against  the  company  for  the  loss 
by  breakage. 

(12)  Yoke  v.  Ohio  Railway  Co.,  51  Ind.  181.  —  A 
certain  quantity  of  wheat  was  delivered  to  the  rail- 
way  company  for   transportation   by  the   plaintiff. 
The  wheat  was  not  delivered  at  the  proper  time  and 
place.     This  action  was  brought  against  the  company 
for  the  value  of  the  wheat.     The  company  proved 
that  one  Johnson  took  out  a  writ  of  replevin,  and 
by  virtue  of  this  writ,  the  sheriff  of  the  county  seized 
the  grain  and  took  it  out  of  the  possession  of  the 
company. 

(13)  Mosesv. Boston^ Maine  R.R.,32N.  H.  523.- 


CASES  —  COMMON  CARRIERS  153 

Ten  bags  of  wool  were  delivered  to  defendant  to  be 
transported  to  Boston  and  then  delivered  to  the  con- 
signee. The  train  arrived  in  Boston  between  i  and 
3  o'clock  in  the  afternoon,  and  in  the  usual  course  of 
business  two  or  three  hours  were  required  for  unload- 
ing. The  warehouse  was  closed  at  5  o'clock,  and 
during  the  night  it  burned.  This  action  was  brought 
to  hold  the  railway  company  responsible,  as  common 
carriers,  for  the  loss  of  the  goods. 

(14)  Dexter  v.  Syracuse  Railroad  Co.,  42  N.  Y. 
326.  —  Plaintiff  was  a  passenger  on  the  defendant 
road,  and  his  trunk  was  lost  while  being  transported 
by  said  road.  The  trunk  contained,  aside  from  his 
wearing -apparel,  material  for  two  dresses  purchased 
for  his  wife,  and  also  material  for  a  dress  intended 
for  the  landlady.  This  action  was  brought  to  re- 
cover for  the  entire  contents  of  the  trunk. 


LESSON  XLII 
NEGOTIABLE   INSTRUMENTS 

77.  IN  GENERAL. 

78.  DEFINITION  AND  DISTINGUISHING 

CHARACTERISTICS. 

79.  KINDS. 

80.  DEFENSES. 

77.  In  General.  —  Much  of  the  business  that  is 
transacted  to-day  is  transacted  without  the  imme- 
diate use  of  money.  Credit  plays  a  much  larger  part 
in  modern  business  than  currency.  Since  this  is  the 
case,  it  has  become  necessary  to  adopt  some  tangible 
representative  of  credit  which  can  be  freely  passed 
from  hand  to  hand,  taking  the  place  of  money  in  the 
payment  of  debts.  The  law  of  negotiable  paper  has 
been  based  upon  the  Law  Merchant,  which  was 
simply  the  established  custom  and  practice  of  busi- 
ness men  in  dealing  with  each  other  in  early  times, 
sanctioned  and  perpetuated  by  decisions  of  the  courts. 
In  nearly  all  of  the  states  a  Negotiable  Instruments 
Statute  has  been  passed,  embodying  nearly  all  of  the 
important  features  of  that  part  of  the  Law  Merchant 
applicable  to  negotiable  paper,  and  making  uniform 
many  points  of  difference  in  the  practice  of  the 

154 


NEGOTIABLE   INSTRUMENTS  1.55 

various  states.  Much  of  the  negotiable  paper  is 
made  by  parties  in  one  state  in  favor-  of  parties  in 
another  state,  and  the  interstate  character  of  trans- 
actions, in  which  negotiable  paper  is  an  important 
feature,  requires  that  uniformity  in  the  interpretation 
and  handling  of  such  paper  be  established  by  statu- 
tory enactments.  New  York  state  was  the  first  to 
adopt  a  Negotiable  Instruments  Statute,  and  the 
other  states  that  have  adopted  such  a  law  have  copied 
the  New  York  state  law,  with  a  few  modifications. 
Therefore,  the  law  regarding  negotiable  paper  is  at 
present  fairly  uniform  and  much  better  adapted  to 
the  needs  of  modern  times  than  is  the  old  Law 
Merchant. 

78.  Definition  and  Distinguishing  Characteristics. 
—  A  negotiable  instrument  is  an  unconditional  prom- 
ise or  order  in  writing,  signed  by  the  maker  or 
drawer,  to  pay  a  certain  sum  in  money  on  demand, 
or  at  a  fixed  or  determinable  future  time,  and  payable 
to  the  order  of  a  person  named  therein,  or  to  bearer. 

In  contracts,  generally,  it  is  the  rule  that  the  burden 
of  proving  consideration  is  upon  him  who  asserts 
that  he  has  a  contractual  claim  against  another.  If 
A  brings  an  action  against  B  on  a  contract  entered 
into  between  A  and  B,  the  burden  of  proving  con- 
sideration is  upon  A,  if  B  sets  up  no  consideration  as 
his  defense.  In  the  case  of  negotiable  instruments 
there  is  an  exception  to  this  rule.  Consideration  is 
presumed,  and  it  is  necessary  for  one  who  sets  up 
the  defense  of  no  consideration  to  prove  that  no  con- 


15-6  NEGOTIABLE   INSTRUMENTS 

sideration  existed,  and,  as  we  shall  see  later,  the  de- 
fense of  no  consideration  is  not  available  against  a 
holder  for  value  without  notice. 

Negotiability  is  the  distinguishing  characteristic 
of  this  kind  of  contract.  According  to  this  principle, 
one  who  becomes  the  lawful  possessor  of  a  negotiable 
instrument  for  value,  before  maturity,  and  without 
notice  of  any  defects  in  it,  can  enforce  the  contract, 
even  though  the  payee  who  transferred  the  instru- 
ment to  him  could  not  have  enforced  it  because  of 
personal  defenses. 

79.  Kinds. -- There  are  three  principal  kinds  of 
negotiable  paper  :  Bills  of  exchange,  or  drafts,  notes, 
and  checks. 

A  bill  of  exchange  is  the  earliest  form  of  commercial 
paper,  and  was  made  necessary  by  the  unsafe  means 
of  transportation  and  the  fact  that  business  com- 
munities were  widely  separated.  It  is  an  order  by 
one  party,  called  the  drawer,  upon  a  second  party, 
called  the  drawee,  to  pay  a  certain  sum  of  money  to 
a  third  party,  called  the  payee,  or  to  his  order,  direct- 
ing that  the  amount  be  charged  to  the  account  of 
the  one  drawing  the  order. 

A  note  is  a  written  promise  by  one  party,  called 
the  maker,  to  pay  a  certain  sum  of  money,  at  a 
certain  time,  to  a  second  party,  called  the  payee,  or 
to  his  order,  or  to  bearer. 

A  check  is  a  bill  of  exchange,  drawn  by  a  party  who 
has  money  deposited  in  a  bank,  ordering  the  bank  to 
pay  a  third  party  a  certain  sum  of  money  and  deduct 


NEGOTIABLE   INSTRUMENTS  157 

the  amount  from  the  amount  on  deposit  to  the  credit 
of  the  drawer. 

Bills  of  lading  and  warehouse  receipts  are  semi- 
negotiable,  in  that  they  may  be  transferred  by  in- 
dorsement and  delivery,  and  also  by  delivery  alone  in 
some  cases. 

Coupon  bonds  are  bonds  to  which  are  attached 
interest  coupons  which  are  to  be  detached  and  pre- 
sented for  payment  at  stated  times.  These  coupons 
are  negotiable. 

80.  Defenses.  —  A  person  to  whom  a  negotiable 
instrument  has  been  properly  transferred,  before  or 
at  maturity,  for  value,  and  in  good  faith  without 
notice  of  any  defects  in  the  instrument  or  imper- 
fections in  the  title  of  the  transferor,  is  said  to  be  a 
holder  for  value  or  bonafide  holder.  One  who  derives 
title  through  a  holder  for  value  is  also  deemed  to  be  a 
holder  for  value,  even  if  he  has  not  conformed  to  all 
the  requirements  of  such  a  holder  given  in  the  pre- 
ceding sentence.  The  title  to  the  instrument  be- 
comes vested  in  such  transferee,  and  he  can  bring  an 
action  for  its  enforcement  in  his  own  name. 

There  are  two  kinds  of  defenses,  viz.,  personal  and 
absolute.  The  personal  defenses  are  those  which  are 
valid  between  the  original  parties  to  the  negotiable 
instrument.  Among  others  may  be  mentioned  no 
consideration,  counterclaim,  and  fraud,  except  such 
fraud  as  vitiates  the  entire  contract.  Fraud  is 
generally  a  personal  defense  only,  but  is  available  to 
the  maker  as  an  absolute  defense,  if  he  can  show  that 


158  NEGOTIABLE   INSTRUMENTS 

he  was  not  negligent  in  allowing  himself  to  be  de- 
frauded. 

The  absolute  defenses  are  those  which  may  be  used 
against  any  holder  of  negotiable  paper,  and  are  such 
defenses  as  want  of  capacity,  forgery,  and  alteration. 

If  A  gives  a  note  to  B  without  consideration  and  B 
holds  the  note  until  maturity,  A  would  have  no  con- 
sideration as  his  defense,  and  such  defense  would  be 
good.  If,  however,  B  transfers  the  note  to  a  holder 
for  value,  the  defense,  no  consideration,  cannot  be 
used  by  A,  as  it  was  personal  against  B  only.  The 
same  would  be  true  if  A  gave  a  note  to  B  with  con- 
sideration, and  at  maturity  A  refused  to  pay  it  on 
the  ground  that  B  owed  him  a  similar  amount.  He 
could  counterclaim  and  in  this  way  avoid  payment ; 
but  if  B  should  transfer  the  note  to  a  holder  for  value, 
A  could  not  set  up  a  counterclaim  as  a  reason  why  he 
should  not  pay  the  transferee  who  holds  the  note  at 
maturity.  If  A  sells  a  horse  to  B  by  means  of  a 
fraudulent  statement  concerning  the  quality  of  the 
horse,  and  receives  a  note  from  B  in  payment,  B 
could  refuse  to  pay  the  note  if  A  held  it  until  matu- 
rity, on  the  ground  that  it  had  been  secured  by  fraud. 
If  A  should  transfer  the  note  to  a  holder  for  value, 
such  holder  for  value  could  enforce  the  note  against 
B,  as  the  defense  of  fraud  in  such  cases  is  a  personal 
one  and  does  not  affect  the  rights  of  a  holder  for  value. 

If  A,  an  infant,  gives  a  note  to  B,  B  could  not  en- 
force the  note  at  maturity,  as  infancy  is  an  absolute 
defense.  The  same  defense  would  be  good  against 


FORM   AND   DELIVERY  159 

any  one  who  might  come  into  possession  of  the  in- 
strument. The  same  would  be  true  in  the  case  of 
forgery,  or  a  material  alteration  in  an  instrument  by 
a  party  to  it. 

LESSON  XLIII 
FORM  AND   DELIVERY 

81.  FORM. 

82.  DELIVERY. 

81.  Form.  —  It  is  not  necessary  that  negotiable 
instruments  be  written  in  any  particular  form.  It  is 
only  required  that  the  instrument  be  in  writing  and 
definite  as  to  the  names  of  the  parties,  amount,  time 
and  place  of  payment,  and  it  must  be  in  a  form  im- 
porting negotiability. 

The  writing  may  be  done  with  any  instrument 
and  upon  any  material  without  affecting  its  validity 
or  negotiability.  All  negotiable  paper  should  be 
written  in  ink,  to  insure  permanency  and  prevent 
alteration. 

The  promise  to  pay  must  be  an  unconditional  one. 
If  the  promise  is  qualified  in  any  way,  the  instrument 
will  be  valid  as  a  contract,  but  not  as  a  negotiable 
instrument,  as  the  characteristic  of  negotiability  will 
be  destroyed. 

The  amount  which  is  promised  must  be  definite  and 
must  be  payable  in  legal-tender  money  of  the  place 
where  the  promise  is  made.  A  written  promise  to 


160  NEGOTIABLE   INSTRUMENTS 

pay  a  certain  amount  in  grain  at  the  market  price  at 
the  time  of  payment  would  not  be  a  negotiable  in- 
strument, as  the  amount  would  be  uncertain.  It 
would  be  possible  to  determine  the  proper  amount  at 
the  time  when  payment  could  be  demanded,  but  this 
is  not  sufficient  to  satisfy  the  requirement  as  to  cer- 
tainty. The  instrument  must  contain  within  itself 
all  the  necessary  data  for  determining  the  amount,  or 
must  expressly  state  the  amount  that  is  to  be  paid. 

The  time  of  payment  must  be  definitely  stated  or 
must  be  ascertainable  from  facts  contained  in  the 
instrument.  An  instrument  made  payable  at  the 
death  of  a  certain  person,  or  upon  the  happening  of 
any  event  which  is  sure  to  occur,  may  be  a  negotiable 
instrument,  even  though  the  day  and  date  are  not 
expressly  stated.  The  time  is  sufficiently  certain 
when  the  instrument  is  payable  on  demand,  as  the 
exact  day  of  payment  is  optional  with  the  holder,  and 
is  not,  therefore,  contingent  upon  the  happening  of 
some  event  which  is  beyond  his  control.  When  no 
time  is  stated  in  the  instrument,  it  is  held  under  the 
Negotiable  Instrument  Law  to  be  payableon  demand. 
When  no  date  appears  in  the  instrument,  it  is  also 
held  that  the  actual  date  of  delivery  is  to  be  deemed 
the  date  of  the  instrument.  Any  holder  will  have 
the  right  to  insert  the  proper  date.  If,  under  these 
conditions,  an  incorrect  date  is  inserted,  the  promisor 
will  be  required  to  allow  that  date  to  stand  if  a  holder 
for  value  acquires  the  instrument. 

The  place  of  payment  should  be  definite  and  when 


FORM  AND   DELIVERY  161 

possible  should  be  stated  in  the  instrument.  It  is 
held  that  when  no  place  of  payment  is  mentioned,  the 
place  of  business,  or,  in  the  absence  of  any  place  of 
business,  the  last-known  residence  of  the  maker  or 
acceptor,  will  be  the  proper  place  to  present  the  in- 
strument. 

The  promise  must  be  made  to  a  certain  person,  his 
order,  or  to  bearer.  To  fulfill  this  requirement,  it  is 
not  necessary  that  the  person  be  designated  by  name, 
but  merely  that  a  description  be  given  by  which  the 
proper  person  to  receive  payment  may  be  ascertained 
at  the  maturity  of  the  instrument.  For  example, 
an  instrument  made  payable  to  the  treasurer  of  the 
General  Electric  Co.  would  be  deemed  payable  to  a 
definite  person.  Whoever  happened  to  hold  the 
office  of  treasurer  of  that  company  would  be  entitled 
to  collect  it.  When  no  person  is  mentioned,  it  is 
held  in  many  jurisdictions  that  the  instrument  is 
payable  to  bearer.  Any  person  into  whose  hands  the 
instrument  comes  lawfully  has  the  right  to  insert  his 
name  as  the  payee. 

Words  of  negotiability,  such  as  order  or  bearer, 
must  appear,  to  make  the  instrument  negotiable. 
If  these  words,  or  similar  words,  are  omitted,  the  in- 
strument is  valid  as  a  contract,  but  is  not  negotiable 
paper. 

82.  Delivery.  —  Delivery  by  the  maker  or  acceptor 
is  essential  to  fix  his  responsibility.  If,  however,  the 
completed  instrument  gets  into  the  hands  of  the 
payee,  no  delivery  will  not  be  a  good  defense  against 


1 62  NEGOTIABLE   INSTRUMENTS 

a  holder  for  value.  Such  a  defense  would  be  good 
only  against  the  person  wrongfully  taking  possession 
of  the  instrument.  Even  in  cases  where  much  care 
has  been  exercised  by  the  promisor  in  such  an  in- 
strument, and  in  spite  of  such  care  the  person  desig- 
nated as  payee  secures  possession  of  the  instrument, 
the  promisor  will  be  liable  to  a  holder  for  value.  It 
is  proper  that,  where  one  of  two  innocent  persons 
must  suffer  a  loss,  the  one  primarily  responsible  for 
the  loss  should  be  the  one  to  stand  it.  A  promisor 
who  completes  an  instrument  is  running  the  risk 
that  it  will  get  into  the  possession  of  the  party  named 
in  it  and  be  used  contrary  to  his  intention.  A  par- 
tially completed  instrument  that  is  completed  by 
one  into  whose  hands  it  falls  is  sometimes  held  to 
be  without  validity,  if  it  is  apparent  that  the  in- 
strument was  not  prepared  by  the  person  whose 
name  appears  on  it  as  maker  or  acceptor.  If  negli- 
gence is  proved,  such  maker  or  acceptor  will  be  liable. 

LESSON  XLIV 
PROMISSORY  NOTES 

83.  KINDS. 

84.  PARTIES. 

85.  CONTRACTS  OF  THE  PARTIES. 

83.  Kinds. -- There  are  three  kinds  of  promissory 
notes  :   several,  joint,  joint  and  several. 

The  several  note  is  one  that  has  but  one  maker. 


PROMISSORY   NOTES  163 

The  joint  note  is  one  that  is  made  by  two  or  more 
makers  who  assume  joint  responsibility  on  the  note. 
In  such  notes  it  must  be  apparent  that  the  liability 
was  intended  to  be  joint  and  not  several.  If  a  note, 
signed  by  two  or  more  parties,  reads,  "  I  promise  to 
pay,"  it  is  apparent  that  the  liability  was  intended  to 
be  several.  That  is,  each  party  assumed  full  re- 
sponsibility on  the  instrument.  The  proper  wording 
in  joint  notes  is,  "We  promise  to  pay,"  or,  "We 
jointly  promise  to  pay."  All  makers  in  a  joint  note 
must  be  sued  together,  as  they  have  a  joint  liability, 
and  if  one  is  released,  the  others  are  also  released. 

A  joint  and  several  note  is  one  in  which  there  are  two 
or  more  makers  who  individually  and  collectively 
assume  the  responsibility  for  the  payment  of  the 
note.  As  stated  in  the  preceding  paragraph,  when 
two  or  more  parties  sign  an  instrument  which  reads, 
;<  I  promise  to  pay,"  the  liability  of  the  makers  is 
several.  The  proper  wording  for  such  a  note  is, 
'  We  jointly  and  severally  promise  to  pay."  In  a 
joint  and  several  note  the  holder  may  proceed  against 
all  as  individuals,  or  any  one  or  more  of  the  makers. 

84.  Parties.  -  -  The  parties  to  a  promissory  note 
are  the  maker  and  the  payee.  The  maker  is  the  one 
who  promises  to  pay  and  the  payee  is  the  one  to 
whom  such  promise  is  made.  The  payee  may  trans- 
fer the  instrument  by  indorsement,  as  we  shall  learn 
in  a  subsequent  section,  and  in  such  cases,  he  be- 
comes an  indorser,  and  the  one  to  whom  he  transfers 
the  instrument  becomes  the  indorsee. 


164  NEGOTIABLE   INSTRUMENTS 

85.  Contracts    of    the    Parties.  —  As    has    been 
stated,  the  maker  is  absolutely  liable  on  the  instru- 
ment, and  his  contract  is  to  pay  the  instrument  when 
it  is  due,  in  accordance  with  its  terms,  and  the  con- 
tract of  the  payee  is  to  accept  the  instrument  as 
conditional    payment   of  the   obligation   which   the 
maker  owes  him.     It  is  generally  held  that  if  the 
maker  fails  to  pay  the  instrument  at  maturity,  the 
payee  may  disregard  the  note  entirely  and  proceed 
to  bring  an  action  on  the  original  debt,  or  he  may 
bring  an   action   on   the  note  which   has   been   dis- 
honored. 

The  contract  of  the  indorser  will  be  discussed  in  a 
later  lesson. 

LESSON  XLV 
BILLS  OF  EXCHANGE 

86.  KINDS. 

87.  PARTIES  AND  THEIR  CONTRACTS. 

86.  Kinds.  —  Bills    of    exchange    or    drafts     are 
classified  in  several  ways.     They  may  be  divided  into 
two    classes    with    reference    to    place.     These    two 
kinds  are  .called  foreign  and  inland.     A  foreign  bill 
of  exchange  is  one  that  is  made  payable  outside  of 
the  state  in  which  it  is  drawn.     An  inland  bill  of  ex- 
change is  one  that  is  payable  in  the  same  state  in 
which  it  is  drawn. 

Drafts  are  also  classified  as  bank  drafts  and  per- 


BILLS   OF   EXCHANGE  165 

sonal  drafts.  A  bank  draft  is  drawn  by  one  bank 
on  another  bank,  in  favor  of  a  third  party.  It  is 
usually  payable  at  sight  and  its  chief  use  is  to  make 
remittances  from  one  place  to  another.  Bank  drafts 
may  be  purchased  at  any  bank,  and  may  be  drawn  on 
banks  in  New  York,  Chicago,  Boston,  or  any  other 
money  center,  according  to  the  location  of  the  draw- 
ing bank  and  the  party  to  whom  the  draft  is  to  be 
sent.  A  personal  draft  is  one  drawn  by  one  person 
or  firm  on  another  person  or  firm.  The  personal 
draft  is  also  divided  into  two  classes,  tzvo-party  and 
three-party  drafts.  A  two-party  draft  is  one  in  which 
the  drawer  orders  the  drawee  to  pay  a  certain  sum  of 
money  to  the  drawer's  order.  This  draft  is  used  for 
collection  purposes.  A  in  Rochester  owes  B  in  Al- 
bany $100.  B  draws  a  draft  on  A  in  favor  of  him- 
self for  the  amount  of  the  debt  and  deposits  it  in  an 
Albany  bank  for  collection.  The  Albany  bank  for- 
wards it  to  Rochester  and  collects  it  through  its 
correspondent  bank  there. 

A  three-party  draft  is  one  in  which  one  person  or 
firm  draws  on  a  second  person  or  firm,  in  favor  of  a 
third  person  or  firm.  This  form  of  draft  is  rapidly 
going  out  of  use.  It  was  used  to  adjust  debts  be- 
tween parties  who  lived  in  distant  places,  when  con- 
veniences for  remitting  money  were  not  very  numer- 
ous. A  in  Rochester  owes  B  in  Chicago  a  certain 
sum  of  money  and  C  in  Chicago  owes  A  a  like  amount. 
A  draws  a  draft  on  C  in  favor  of  B  and  remits  it  to 
B  to  present  to  C  for  payment.  When  C  pays  the 


1 66  NEGOTIABLE   INSTRUMENTS 

draft,  he  cancels  his  indebtedness  to  A  and  also  A's 
indebtedness  to  B,  without  the  transmission  of  any 
money  through  the  mails. 

Drafts  are  also  classified  as  to  time.  They  may 
be  either  time  or  sight  drafts.  A  time  draft  is  one 
that  is  made  payable  at  a  stated  time  in  the  future, 
either  after  date  or  after  sight.  When  a  draft  is 
made  payable  after  sight,  the  time  does  not  begin  to 
run  until  the  drawee  has  signified  by  his  acceptance 
that  he  will  pay  it  when  due. 

A  sight  draft  is  one  payable  upon  presentation  or  on 
demand.  To  hold  the  indorsers,  it  is  necessary  to 
present  the  draft  within  a  reasonable  time  after  it  is 
received.  What  is  a  reasonable  time  will  depend 
upon  all  the  circumstances  in  any  given  case,  but 
demand  paper  should  rarely  be  allowed  to  run  longer 
than  sixty  days,  if  there  are  indorsers. 

A  check  has  been  defined  as  a  draft  drawn  by  a 
person  having  money  on  deposit  in  a  bank,  ordering 
that  bank  to  pay,  on  demand,  a  certain  sum  of  money 
to  a  designated  payee.  The  drawee  bank  is  obliged 
to  honor  a  check,  if  the  drawer  has  funds  to  his  credit. 
In  this  respect  the  check  is  different  from  the  ordinary 
three-party  draft,  as  the  ordinary  drawee  is  under  no 
obligation  to  pay  unless  he  wishes  to  do  so.  A  check 
should  be  presented  for  payment  promptly,  and  if 
the  payee  does  not  present  it  for  payment  within  a 
reasonable  time,  and  the  bank  fails  before  present- 
ment is  made,  he  will  be  the  loser,  if  the  drawer  had 
funds  on  deposit  at  the  bank  at  the  time  of  its  failure. 


BILLS  OF  EXCHANGE  167 

The  holder  of  a  check  who  does  not  wish  the  cash  at 
once,  may  take  it  to  the  bank  on  which  it  is  drawn 
and  have  the  cashier  certify  it.  This  is  done  by 
writing  "  accepted,"  or  words  to  that  effect,  with  the 
cashier's  signature  on  the  face  of  the  check.  When 
this  is  done,  the  credit  of  the  bank  is  substituted  for 
the  credit  of  the  drawer  of  the  check,  and  in  case 
of  the  bank's  failure,  the  holder  of  the  check  will  be 
the  loser.  Certification  releases  all  indorsers.  If 
the  certification  is  procured  by  the  drawer  before 
delivering  the  check,  he  is  not  released  and  he  will 
be  the  loser  in  case  the  bank  fails  before  the  holder 
has  presented  the  check  for  payment,  if  negligence 
cannot  be  charged  against  the  holder.  But  the 
effect  of  acceptance,  when  secured  by  the  drawer,  is  to 
give  the  additional  credit  of  the  bank. 

87.  Parties  and  their  Contracts.  -  -  The  person  or 
firm  who  orders  the  money  to  be  paid  is  called  the 
drawer.  The  drawer  contracts  to  be  responsible  to 
the  payee,  or  a  holder  for  value,  in  case  the  drawee 
refuses  to  pay,  or  agree  to  pay,  in  accordance  with 
the  terms  of  the  draft,  providing  he,  the  drawer,  is 
notified  promptly  of  such  refusal  on  the  part  of  the 
drawee. 

The  drawee  is  the  person  or  firm  who  is  ordered  to 
pay  the  money.  The  drawee  is  not  obligated  either 
to  pay,  or  to  agree  to  pay,  and  may  refuse  to  do 
either  if  he  wishes.  If  he  is  willing  to  make  payment 
in  accordance  with  the  conditions  of  the  draft,  he 
signifies  his  willingness  by  accepting  it.  This  is 


1 68  NEGOTIABLE   INSTRUMENTS 

done  by  writing  across  the  face  of  the  instrument  the 
word  "  accepted,"  with  his  signature,  and  in  the  case 
of  drafts  made  payable  after  sight,  with  the  date. 
From  this  time  on,  he  is  known  as  the  acceptor  and 
his  liability  is  exactly  the  same  as  that  of  a  maker  on 
a  promissory  note.  He  has  unconditionally  promised 
to  pay  it  and  may  be  sued  .upon  his  failure  to  fulfill 
his  agreement.  The  negotiability  of  the  draft  will 
be  destroyed  if  the  drawee,  in  accepting,  makes  pay- 
ment conditional  upon  the  happening  of  any  event. 
For  example,  if  he  agreed  to  pay  the  draft  "pro- 
viding he  was  at  the  time  of  maturity  indebted  to  the 
drawer,"  his  contract  would  be  good,  but  the  negotia- 
bility of  the  draft  would  be  destroyed.  The  same 
would  be  true  if  he  stated  in  his  acceptance  that  he 
would  pay  the  amount  "  out  of  funds  belonging  to 
the  drawer  and  in  his  possession  at  the  date  of  matur- 
ity," as  there  would  be  no  certainty  that  such  funds 
would  be  in  his  hands  at  that  time. 

If  the  drawee  named  in  the  draft  refuses  to  accept, 
a  friend,  or  any  third  party,  might  accept  the  draft 
for  him  and  become  liable  upon  it.  In  such  cases, 
the  holder  of  the  instrument  at  maturity  would 
again  present  it  to  the  designated  drawee,  and  upon 
his  failure  to  pay,  would  present  it  to  the  party  who 
had  accepted  it.  Such  an  acceptance  is  called  an 
acceptance  for  honor,  or  an  acceptance  supra  protest. 

It  sometimes  happens  that  a  drawee  has  previously 
agreed  in  writing  to  accept  a  draft  drawn  by  a  cer- 
tain party  on  him  for  a  specified  amount.  When 


NEGOTIATION  AND   INDORSERS  169 

this  is  the  case,  the  holder  for  value,  or  the  original 
payee,  who  has  taken  the  draft  with  knowledge  of 
such  previous  promise  to  accept,  does  not  need  to 
have  further  acceptance,  and  the  drawee  will  be 
liable  on  the  draft  the  same  as  though  he  had  ac- 
cepted it  in  the  usual  way.  Such  an  acceptance  is 
called  a  virtual  acceptance.  Drafts  drawn  by  persons 
on  banks  that  have  previously  agreed  to  honor  such 
drafts,  as,  for  example,  those  drawn  against  a  letter  of 
credit,  belong  to  this  class.  A  letter  of  credit  is  an 
agreement  by  a  bank  to  honor  drafts  drawn,  under 
certain  conditions,  by  a  person  named  in  the  letter. 


LESSON  XLVI 
NEGOTIATION  AND  INDORSERS 

88.  DEFINITION  OF  NEGOTIATION. 

89.  DEFINITION  OF  INDORSER. 

90.  KINDS  OF  INDORSERS. 

91.  THE  CONTRACT. 

92.  KINDS  OF  INDORSEMENTS. 

88.  Definition  of  Negotiation.  —  By  negotiation 
is  meant  the  transfer  of  a  negotiable  instrument  by 
the  original  payee,  or  by  a  holder  for  value,  by 
delivery,  in  the  case  of  an  instrument  that  is  payable 
to  bearer,  or  by  indorsement  and  delivery,  when  pay- 
able to  a  certain  person  or  his  order. 

When  an  instrument  is  indorsed  and  delivered  to 


170  NEGOTIABLE   INSTRUMENTS 

another  party,  the  one  transferring  it  is  called  the 
indorser,  and  the  one  to  whom  it  is  transferred,  the 
indorsee.  The  indorsement  should  be  placed  on  the 
back  of  the  instrument,  across  the  left  end,  as  near 
the  top  as  is  convenient,  to  allow  for  any  subsequent 
indorsements  that  may  be  made.  An  indorser  is  not 
an  ordinary  surety  or  guarantpr,  as  he  is  entitled  to 
notice  of  dishonor  by  the  maker  or  acceptor. 

89.  Definition  of  Indorser.  —  An    indorser  is  one 
who  writes  his  name  on  the  back  of  a  negotiable  in- 
strument and  who  is  not  in  terms  made  an  ordinary 
surety  or  a  guarantor. 

90.  Kinds  of  Indorsers.  —  When  the  holder  of  an 
instrument  writes  his  name  on  the  back  for  the  pur- 
pose of  transferring  the  instrument  in  the  regular 
course  of  business,  he  is  said  to  be  a  regular  indorser. 
When  one  who  is  not  otherwise  a  party  to  the  instru- 
ment places  his  name  on  the  back  for  the  purpose  of 
guaranteeing  the  payment  of  the  instrument,  he  is 
called  an  irregular  indorser.     There  is  some  conflict 
in  various  jurisdictions  regarding  the  exact  contract 
of  the  irregular  indorser,  but  in  general  he  is  held  to 
be   an   indorser   and   has   the   same  liability   as   the 
regular  indorser,  so  far  as  his  warranties  on  the  instru- 
ment are  concerned. 

91.  The   Contract. -- The  regular  indorser,  when 
he  places  his  name  on  the  back  of  the  instrument, 
makes  a  bill  of  sale  of  the  instrument  to  the  transferee, 
conveying  to  him  all  right,  title,  and  interest  which 


NEGOTIATION  AND   INDORSEES  171 

the  indorser  may  have  in  the  instrument;  he  also 
makes  the  following  warranties  regarding  the  instru- 
ment : 

(a)  That  all  the  parties  whose  signatures  appear 
on  the  instrument  have  capacity  to  contract ; 

(b)  that  the  signatures  are  genuine ; 

(c)  that  the  instrument  is  regular  on  its  face ; 

(d)  that  there  are  no  defects  which  will  interfere 
with  its  collection  when  it  is  due ; 

(i)  that  it  will  be  paid  according  to  its  terms  at 
maturity; 

(/)  that  if  it  is  not  paid,  the  indorser  will  pay 
it,  providing  he  is  promptly  notified  of  its  non- 
payment. 

92.  Kinds  of  Indorsements.  -  -  The  regular  in- 
dorsement may  be  made  in  blank  by  simply  writing 
the  name  of  the  indorser  on  the  back.  This  makes 
the  instrument  payable  to  bearer.  If  the  indorser 
writes  the  words,  "  Pay  to  the  order  of"  a  certain 
person,  above  his  name,  the  indorsement  is  said  to  be 
in  full.  Further  negotiation  may  be  made  by  in- 
dorsement and  delivery  by  the  holder. 

A  qualified  indorsement  may  be  made  by  writing  the 
words,  "  Without  recourse,"  over  the  indorsement, 
and  the  effect  of  this  is  to  make  the  contract  of  the 
indorser  a  bill  of  sale  and  a  warranty  on  all  points 
except  that  it  will  be  paid  at  maturity.  When  this 
indorsement  is  used,  the  holder  of  the  instrument  must 
look  to  the  principal  debtor  for  payment.  However, 
if  there  is  a  defect  in  the  instrument,  or  the  parties 


172  NEGOTIABLE   INSTRUMENTS 

have  not  capacity  to  contract,  or  the  instrument  is  a 
forgery,  the  indorser  is  still  liable  on  his  warranty. 
If,  however,  the  principal  debtor  becomes  insolvent 
and  does  not  pay  the  instrument,  the  holder  cannot 
look  to  the  indorser  who  has  indorsed  without  re- 
course. 

A  restrictive  indorsement  may  be  made  by  writing 
!<  Pay  to  A  only,"  over  the  indorser's  name.  This 
limits  the  further  negotiation  of  the  instrument. 
Merely  indorsing  with  the  words,  "  Pay  to  A,"  with- 
out adding  the  words, "  Or  order,"  does  not  restrict 
further  negotiation.  A  special  indorsement  may 
also  be  made  by  writing  the  words,  "For  collection." 
above  the  indorser's  name.  This  indicates  .that 
title  to  the  instrument  has  not  been  surrendered 
but  that  the  transferee  is  authorized  to  collect  for 
the  indorser,  and  to  deliver  the  instrument  as  his 
agent. 

In  some  cases  a  party  places  his  name  on  the  back  of 
an  instrument  guaranteeing  the  happening  of  a  cer- 
tain event.  For  example,  one  may  write  on  the  back 
of  an  instrument,  "  I  hereby  guarantee  the  collec- 
tion of  the  within  instrument."  If  the  instrument 
is  not  paid  at  maturity,  the  holder  must  proceed 
against  the  party  primarily  liable  and  use  every  pos- 
sible legal  means  to  effect  collection.  If,  after  ex- 
hausting all  the  means  at  his  command,  the  instru- 
ment still  remains  unpaid,  the  guarantor  of  collection 
will  then  be  liable.  One  who  writes,  "  I  hereby  guar- 
antee the  payment  of  the  within  instrument,"  can 


NEGOTIATION  AND   INDORSERS  173 

be  proceeded  against  immediately  upon  the  failure 
of  the  primary  party  to  pay  at  the  proper  time. 

Indorsers  are  individually  liable  in  theorderin  which 
they  sign  their  names  on  the  back  of  the  instrument, 
unless  evidence  can  be  produced  tending  to  show 
that  there  was  a  different  agreement  between  them. 
Since  this  is  the  case,  release  of  one  indorser  by  the 
holder  will  have  the  effect  of  releasing  all  subsequent 
indorsers.  An  extension  of  time  by  the  creditor 
without  the  consent  of  the  indorsers  will  release  them. 

If  more  indorsements  are  to  be  made  on  the  in- 
strument than  can  be  made  on  the  back,  additional 
ones  may  be  made  on  a  separate  piece  of  paper  which 
is  attached  to  the  original  instrument. 

Proper  notice  is  sent  to  the  indorsers  when  it  is 
mailed  within  twenty-four  hours  after  the  default, 
or,  if  the  indorsers  live  in  the  same  place,  when  it  is 
mailed  so  as  to  reach  them  in  the  due  course  of  mails 
within  twenty-four  hours  after  the  default.  If 
only  one  indorser  is  notified,  and  he  notifies  the 
others  above  him  on  the  instrument,  such  notification 
may  be  made  within  twenty-four  hours  after  receipt 
by  each  indorser,  and  such  notification  by  indorsers  to 
other  indorsers  will  be  sufficient  to  enable  the  holder 
of  the  instrument  to  proceed  against  any  of  them  who 
have  received  notice  either  directly  or  through  subse- 
quent indorsers.  It  is  always  best  to  notify  all 
the  indorsers  at  the  same  time  and  thus  avoid  all 
possibility  of  releasing  any  of  them  by  reason  of 
failure  to  notify. 


174  NEGOTIABLE   INSTRUMENTS 

LESSON   XLVII 
PRESENTMENT  AND   DEMAND 

93.  PRESENTMENT. 

94.  NOTICE  OF  DISHONOR. 

95.  LEGAL  RATE  OF  INTEREST. 

93.  Presentment.  —  When  a  negotiable  instru- 
ment becomes  due,  the  holder  should  present  it  to  the 
party  primarily  liable  on  it  and  demand  payment. 
This  is  not  necessary  to  fix  the  liability  of  such 
party,  and  an  action  can  be  brought  against  him  on 
the  instrument,  without  previous  demand,  any  time 
within  the  time  allowed  under  the  Statute  of  Limita- 
tions, which  is  six  years  in  most  of  the  states.  How- 
ever, if  no  presentment  and  demand  are  made,  no 
interest  can  be  recovered  from  the  time  the  instru- 
ment becomes  due  to  the  time  of  settlement.  When 
presentment  and  demand  are  made,  the  holder  may 
recover  interest  on  the  entire  amount  for  the  time  it 
remains  unpaid  after  it  becomes  due.  It  is  also 
necessary  to  present  the  instrument  and  demand 
payment  in  order  to  fix  the  liability  of  secondary 
parties  whose  names  appear  on  the  instrument. 

The  presentment  must  be  made  at  a  proper  time, 
usually  during  business  hours,  if  the  presentment  is 
to  be  made  at  the  place  of  business  of  the  primary 
party.  If  the  presentment  is  to  be  made  at  the  place 
of  residence  of  the  one  obligated  to  pay,  any  conven- 


PRESENTMENT  AND  DEMAND  175 

ient  time  during  the  day  will  satisfy  the  requirement 
as  to  the  time  of  presentment.  It  is  not  necessary 
that  presentment  be  made  before  the  close  of  banking 
hours,  unless  the  instrument  is  payable  at  a  bank,  in 
which  case  presentment  would  be  made  at  a  proper 
time  if  it  was  made  at  any  time  before  the  regular 
closing  hour. 

The  place  of  payment  should  be  designated  in  the 
instrument,  but  when  no  place  of  payment  is  desig- 
nated, the  instrument  is  payable  at  the  place  of  busi- 
ness of  the  primary  party,  or,  when  no  place  of  busi- 
ness is  known,  at  his  last-known  place  of  residence. 
It  has  also  been  held  that  where  no  place  of  residence 
or  business  is  known,  the  holder  may  present  it  at 
the  place  where  the  instrument  was  given  and  such 
presentment  will  be  deemed  to  be  at  a  proper  place. 

In  making  presentment  and  demand,  it  is  necessary 
that  the  holder  have  the  instrument  with  him  and 
actually  show  it  to  the  party  upon  whom  demand  is 
being  made,  in  order  that  he  may  know  that  the 
holder  is  in  a  position  to  deliver  the  instrument  upon 
receiving  payment,  and  that  he  has  the  proper  title 
to  it.  When  the  instrument  has  been  lost  or  de- 
stroyed, the  holder  can  demand  payment,  upon 
showing  his  willingness  to  give  the  primary  party  a 
bond  of  indemnity,  to  provide  against  any  loss  which 
might  occur  through  the  finding  and  presentation  of 
the  instrument  by  a  holder  for  value.  One  who  took 
an  instrument  from  a  finder  for  value,  without  knowl- 
edge that  he  had  no  title,  would  become  a  bona  fide 


176      •          NEGOTIABLE   INSTRUMENTS 

holder.  When  an  instrument  is  payable  at  a  bank, 
presentment  and  demand  are  made  by  having  the 
instrument  at  the  bank  with  the  knowledge  of  the 
officers  of  the  bank,  for  the  purpose  of  collection,  at 
the  date  of  maturity. 

The  presentation  must  be  made  to  the  primary 
party  in  person,  if  he  can  be  found,  at  the  proper 
place,  and  if  he  cannot  be  found,  to  any  of  his  agents, 
servants,  or  representatives  who  may  be  found  at  that 
place.  When  it  is  a  physical  impossibility  for  the 
holder  to  present  the  instrument  at  the  proper  time 
and  place,  such  delay  will  be  excused  upon  present- 
ing proper  evidence  of  the  impossibility,  and  also  of 
the  fact  that  the  holder  presented  it  promptly  after 
the  disability  was  removed. 

It  is  also  unnecessary  to  make  presentment  and 
demand  when  any  of  the  parties,  whose  liability 
depends  upon  such  presentment  and  demand,  waive 
the  right  to  have  notice  of  presentment  and  demand. 
The  waiver  is  usually  made  by  writing  words  to  that 
effect  over'the  indorsement. 

Three  days  of  grace  were  formerly  allowed  in  all 
states  on  drafts  and  notes,  and  while  the  custom  has 
been  discontinued  in  most  states,  in  a  few  states  grace 
is  still  allowed.  Where  days  of  grace  are  allowed, 
presentment  and  demand  must  be  made  on  the  third 
day  after  the  date  of  maturity.  If  this  third  day  is 
Sunday  or  a  legal  holiday,  the  instrument  is  payable 
the  next  preceding  business  day.  Where  no  days  of 
grace  are  allowed,  an  instrument  maturing  on  Sun- 


PRESENTMENT  AND   DEMAND  177 

day  or  a  legal  holiday  will  be  payable  on  the  next 
succeeding  business  day.  Saturday  is  considered  a 
holiday  in  the  case  of  instruments  made  payable  at  a 
bank  that  is  open  only  until  noon  Saturdays. 

In  computing  the  time  to  find  the  due  date  of  an 
instrument  that  reads  a  certain  number  of  days  after 
date,  the  actual  number  of  days  must  be  counted, 
excluding  the  day  when  it  was  made  and  including  the 
due  date.  If  the  time  is  a  certain  number  of  months 
after  date,  the  instrument  will  become  due  on  the 
same  day,  or  as  near  that  day  as  possible,  in  the 
proper  month.  For  example,  a  note  made  January 
30,  1913  for  one  month  would  have  been  due  Feb- 
ruary 28,  1913.  If  it  had  been  made  for  thirty 
days,  it  would  have  been  due  March  i,  1913. 

94.  Notice  of  Dishonor.  —  When  an  instrument 
is  presented  for  payment  and  payment  is  refused, 
the  holder  should  immediately  notify  the  indorsers 
or  secondary  parties  of  such  dishonor,  in  order  that 
he  may  hold  them  liable  upon  the  instrument.  If 
there  are  two  or  more  secondary  parties,  it  is  best  to 
notify  them  all.  If  the  last  one  is  notified,  he  should 
in  turn  notify  the  other  indorsers  whose  names  ap- 
pear above  his.  Such  notice  by  one  indorser  to 
another  will  have  the  same  effect,  as  far  as  the  holder 
is  concerned,  as  if  he  had  personally  notified  each 
indorser  instead  of  only  one.  When  the  instrument 
is  a  foreign  bill  of  exchange,  it  is  necessary  to  send  a 
formal  notice  of  dishonor  in  the  form  of  a  notice  of 
protest.  This  notice  of  protest  is  a  notice  sent  by  a 


178  NEGOTIABLE  INSTRUMENTS 

notary  public  stating  that  presentment  has  been 
made,  payment  refused,  and  that  the  holder  looks  to 
the  indorser  for  payment.  When  notice  is  waived, 
the  formality  of  protest  may  be  dispensed  with.  A 
waiver  of  protest  also  waives  the  right  to  be  notified. 

It  is  usually  held  that  a  notice  to  be  sent  within  the 
proper  time  must  be  dispatched  within  twenty-four 
hours  after  the  dishonor  has  taken  place,  or  if  the 
party  to  whom  it  is  sent  lives  in  the  same  place,  it 
must  be  sent  so  that  it  should  reach  him  within  the 
twenty-four  hours.  If  the  holder  does  not  know 
the  whereabouts  of  the  secondary  party,  he  may 
mail  the  notice  to  his  last  known  place  of  residence 
or  business. 

95.  Legal  Rate.  —  In  every  state  a  legal  rate  of  in- 
terest has  been  established,  and  in  all  cases  where 
interest  is  agreed  upon  but  no  definite  rate  is  men- 
tioned, the  legal  rate  can  be  recovered.  This  rate  can 
also  be  collected  on  all  debts  which  remain  unpaid 
after  the  date  of  maturity.  In  many  states  a  maxi- 
mum rate  has  also  been  established  and  any  rate  of 
interest  above  this  maximum  rate  is  considered 
usury.  The  penalty  for  usury  varies  in  the  different 
states.  In  some  states  interest  above  the  legal  rate 
is  forfeited ;  in  others  all  interest  is  forfeited,  and 
in  still  others  the  interest  and  principal  are  both 
forfeited. 


CASES  ON   NEGOTIABLE   INSTRUMENTS        179 

LESSON  XLVIII 
96.   CASES  ON  NEGOTIABLE  INSTRUMENTS. 

(1)  Chicopee   Bank  v.  Philadelphia  Bank,  8  Wall, 
641.  —  A  draft  was  sent  to  the  bank  in  a  letter,  for 
collection.     When  it  was  brought  from  the  post  office 
to  the  bank, it  was  laid  down  with  other  papers  on  the 
cashier's   desk,   and .  before  being  taken   up   by  the 
cashier  it  slipped  through  a  crack  in  the  desk  and 
disappeared.     The  date  of  maturity  passed   and  it 
was  proved  by  the  party  primarily  liable  that  no 
presentment  and  demand  had   been  made  to  him. 
By  the  terms  of  the  instrument  it  was  payable  at 
the    bank.     Was  there   a   proper   presentment    and 
demand  ? 

(2)  White  v.  Gushing,   88  Me.   339.  —  This  action 
was   brought   by   the   indorsee   of  an  order   in    the 
following  form  : 

#120.00  PlSCATAQUIS    SAVINGS    BANK. 

Pay  to  JAMES  LAWLER,  or  order, 


One  hundred  twenty^  ^Dollars. 

Charge  to  my  account  on  book. 
No J.  N.  GUSHING. 

WITNESS  :  The  bank  book  of  the  depositor  must  accompany 
this  order. 

It  was  contended  that  this  instrument  was  not  an 
unconditional  order,  and  this  action  was  brought  to 
determine  this  fact. 


i8o     CASES  ON  NEGOTIABLE   INSTRUMENTS 

(3)  Redman   v.    Adams,  51  Me.  429. — The  draft 
upon  which  this  case  was  founded  read  as  follows  : 

"  For  value  received  please  pay  to  the  order  of  F.  G.  and  C.  A. 
Tilden,  $40.,  and  charge  the  same  to  whatever  may  be  due  me 
for  my  share  of  the  fish  caught  on  board  the  schooner  '  American 
Star 'for  the  fish  season  of  1860." 

The  question  was   raised   as  to  whether  this  in- 
strument was  an  unconditional  order. 

(4)  Rice  v.  Rice,  43  App.  Div.  N.  Y.  458.— This 
action  was  founded  upon  an  instrument  which  was 
made  payable  at  the  death  of  a  certain  person  and 
this  case  was  tried  to  determine  whether  the  instru- 
ment was  payable  at  a  definite  time  within  the  mean- 
ing of  the  statute. 

(5)  Cowing  v.  Altman,  71  N.  Y.  435.  — This  was  an' 
action  founded  on  an  instrument  that  had  no  date. 
The  question-  involved  in  the  case  was  the  date  of 
maturity. 

(6)  Russell  v.  Langstaffe,  2  Doug.  (Eng.)  514.  — A 
certain  person  indorsed  his  name  upon  the  back  of 
certain  checks,  blank  as  to  amount,  date,  and  time  of 
payment.     The  checks  were  filled  in  by  the  person 
to  whom  the    indorser  gave    them  with    amounts, 
dates,    and   time   of  payment   different   from   those 
authorized,   and  were  negotiated  to  Russell,  a  bona 
fide  holder.     The    indorser   refused   to   pay    on   the 
ground  that  the  instruments  had   been  improperly 
filled  out. 

(7)  Brown  v.  Reed,  79  Pa.  St.  370.  —  T.  H.  Brown 
signed  an  instrument  in  the  following  form  : 


CASES   ON   NEGOTIABLE   INSTRUMENTS      181 


NORTH  EAST,  April  3,  1872. 
Six  mos.  after  date  I  promise  to  pay  J.  B.  SMITH  or 
order  Two  HUNDRED  AND  FIFTY  DOLLARS 

for    value    received    with    legal    interest,    without 
defalcation  or  stay  of  execution. 

T.  H.  BROWN, 


bearer  $50  when  I  sell  by 

worth  of  Hay  &  Harvest  Grinders, 

appeal,  and  also  without 


Agent  for  Hay  &  Harvest  Grinders. 


The  instrument  was  torn  apart  at  the  vertical 
dotted  line  and  the  left-hand  portion  was  discounted 
for  J.  B.  Smith.  Brown  refused  payment  on  the 
ground  that  he  had  never  signed  such  an  instrument. 
This  action  was  brought  to  test  the  merits  of  the 
case. 

(8)  Smith  v.  Smith,  i  R.  I.  398. — This  action  was 
founded  on  an  instrument  in  which  the  amount  ex- 
pressed  in   words  was  Three   hundred   seventy-five 
and   ninety-four   hundredths   dollars.     The   amount 
expressed  in  figures  was  $175.94.     The  clerk  of  the 
bank  discounting  the  instrument  altered  the  figures 
to  make  them  correspond  with  the  words,  and  the 
defendant  insisted  that  this  alteration  made  the  in- 
strument void. 

(9)  German  American  Bank  v.   Milkman,  3 1  N.  Y. 
Misc.  87.  —  Milliman  was  the  maker  of  a  note  which 
was  payable  at  the  German  American  Bank.     On  the 
date  of  maturity  the  payee  called  several  times  to 
ascertain  whether  Milliman  had  made  payment,  but 
found    that    he    had    not    done    so.     About    fifteen 
minutes  before  closing  hour,  the  bank  was  instructed 
to  protest  the  note  for  non-payment.     Five  minutes 
before  closing  time,  Milliman  appeared  and  offered  to 


1 82       CASES   ON   NEGOTIABLE   INSTRUMENTS 

pay  the  note,  but  the  bank  refused  to  accept  payment 
without  receiving  the  protest  fees  also.  Milliman 
refused  to  pay  the  protest  fees,  and  this  action  was 
brought  to  determine  whether  the  bank  was  justified 
in  protesting  the  note. 

(10)  Coolidge  v.  Pay  son,  2  Wheat.  (U.  S.)  66.  — A 
letter  was  written  by  a  debtor  describing  a  draft  in 
terms  that  could  not  be  mistaken  and  promising  to 
accept  it  if  drawn.  The  draft  was  drawn  in  conform- 
ity with  this  previous  written  statement  of  the  debtor 
and  was  given  to  the  payee  together  with  the  letter. 
Afterwards  the  drawee  refused  to  honor  the  instru- 
ment on  the  ground  that  he  had  not  accepted  it. 
This  action  was  brought  to  determine  whether  he  had 
the  right  to  refuse  payment  on  this  ground. 

(n)  Thompsons.  Sloan,  23  Wend.  (N.Y.)  71.  — In 
this  case  a  note  was  made  and  dated  at  Buffalo,  N.  Y. 
for  $2500  payable,  twelve  months  after  date,  at  the 
Commercial  Bank  of  Buffalo,  N.  Y.,  in  Canadian 
money.  The  instrument  was  properly  signed  and 
was  made  in  favor  of  a  designated  payee.  It  also 
contained  the  words  of  negotiability.  This  action 
was  brought  to  determine  whether  it  was  a  negotiable 
instrument  or  not. 

(12)  Shawv.  Smith,  150  Mass.  166. —  Eugene  Bridg- 
man  made  an  instrument  in  writing  July  19,  1873, 
which  read  as  follows  :  "  For  value  received,  I  prom- 
ise to  pay  F.  B.  Bridgman's  estate  or  order  $126  on 
demand  with  interest  annually."  F.  B.  Bridgman 
died  and  the  plaintiff  in  this  case  was  appointed  ad- 


CASES  ON  NEGOTIABLE   INSTRUMENTS      183 

ministrator  of  his  estate.  This  action  was  brought  to 
recover  on  the  instrument  as  a  negotiable  note. 
Does  the  instrument  contain  all  the  essentials  re- 
quired to  make  it  negotiable  ? 

(13)  Richardson  v.  Carpenter,  46  N.  Y.  660. — The 
instrument  upon  which  this  action  was  based  read  as 
follows  :  "  Please  pay  A  or  order  $500,  for  value  re- 
ceived, out  of  the  proceeds  of  the  claim  against  the 
Peabody  estate  now  in  your  hands  for  collection, 
when  the  same  shall  have  been  collected  by  you." 
For  certain  reasons  it  was  contended  by  the  defend- 
ant in  the  case  that  this  was  not  a  negotiable  instru- 
ment. What  should  be  the  holding  in  this  case  ? 


LESSON  XLIX 

(1)  Kelley  v.  Hemmtngway,   13    111.  604.  —  David 
Kelley  made  the  following  instrument  in  writing  at 
Castleton,  April  27,   1844:  "  Due  Henry  D.   Kelley 
$53,  when  he  is  21  years  old,  with  interest."     It  was 
proved  by  the  plaintiff  in  the  case  that  Henry  D. 
Kelley  became  of  age   before  this   action  was  com- 
menced.    The  only  question  involved  in  the  case  is 
one  of  negotiability. 

(2)  Matthews  &  Co.  v.  Mattress  Co.,  87  Iowa,  246.- 
This    action    was    brought   on    a    promissory    note 
against     the    Dubuque    Mattress      Company     and 
John  Kapp.     The  note  read,  "We  promise  to  pay," 
and    was    signed,    "  Dubuque    Mattress    Company, 


184      CASES  ON  NEGOTIABLE   INSTRUMENTS 

John  Kapp,  Pt."  It  was  shown  that  the  "  Pt." 
was  an  abbreviation  used  for  president.  Was  Kapp 
personally  liable  on  this  instrument  ? 

(3)  Grange  v.  Reigh,  93  Wis.  552. — After  banking 
hours  on  July  2Oth,  Reigh  wrote  a  check  for  $1211 
upon  the  South  Side  Savings  Bank  of  Milwaukee  and 
delivered  the  same  to  plaintiff,  who  also  resided  in 
Milwaukee.     The  check  was  not  presented  on  July 
2ist,  although  the  bank  was  open  and  would  have 
paid  it  at  any  time  during  banking  hours  of  that  day. 
The  bank  did  not  open  its  doors  July  22d,  nor   any 
day    thereafter,     having     become    insolvent.     This 
action  was  brought  to  recover  the  amount  covered 
by  the  check  from  Reigh. 

(4)  Minot  v.    Russy    156    Mass.    458.  —  Russ,    on 
October  29,   1891,  drew  a  check  on  the  Maverick 
National  Bank  payable  to  plaintiff,  who  informed  him 
that  the  check  must  be  certified  by  the  bank  before 
it  would  be  received.     On  the  same  day,  defendant 
presented  it  at  the  bank  for  certification.     The  bank 
wrote  on  the  face  of  it,  "  Maverick  National  Bank. 
Pay   only    through    clearing    house.     J.    W.    Work, 
Cashier.     A.    C.    J.,    Paying   Teller."     On   October 
3  ist,  after  certification  was  secured,  the  check  was 
delivered  to  the  plaintiff  for  a  valuable  consideration. 
The    bank    stopped     payment     Monday    morning, 
November  2d,  before  the  plaintiff  had  had  reason- 
able opportunity  to  present  the  check.     This  action 
was  brought  to  recover  the  amount  of  the  check  from 
the  defendant  upon  the  failure  of  the  bank  to  pay. 


CASES  ON  NEGOTIABLE   INSTRUMENTS        185 

(5)  Head  v.    Hornblower,    156   Mass.  458. — This 
case  was  decided  by  the  same  court  and  at  the  same 
time  as  the  preceding  case  of  Minot  v.  Russ.      On 
Saturday,  October  31,   1891,  the  defendant  drew  a 
check  on  the  Maverick  National  Bank,  payable  to 
plaintiff,   and   delivered   it.     As  the   check  was   re- 
ceived too  late  to  be  deposited  by  the  plaintiff  for 
collection  in  time  to  go  through  the  clearing  house 
that  day,  the  plaintiff  secured  certification  of  the 
check  by  the  bank  in  the  following  form  :    "  Mav- 
erick National  Bank.     Certified.     Pay  only  through 
clearing  house.     C.  C.  Domett.     A.,  Cashier/'     As 
was  said  in  the  preceding  case,  the  Maverick  Bank 
did  not  open  its  doors  November  zd.     When   this 
check    reached    it    through    the    clearing    house,    it 
was    dishonored,    owing   to    the    insolvency   of  the 
bank. 

(6)  Barnes  v.  Faughan,6  R.  I.  259. — The  defend- 
ant was  the  indorser  of  a  note  which  was  made  by 
Northrup  and  in  which  no  definite  place  of  payment 
was  named.     The  plaintiff  left  the  note  at  the  Mt. 
Vernon   Bank  in   Foster  for  collection.     When  the 
note  came  due,  the  only  demand  that  was  made  upon 
the  maker,  Northrup,  was  in  the  form  of  the  usual 
printed  bank  notice,  which  was  mailed  to  Northrup 
by  the  cashier   and   directed  to  Providence,  where 
Northrup  was  known  to  have  been  living  in  the  early 
part  of  the  month  in  which  the  note  came  due.     It 
was  shown  that  he  did  not  live  at  Providence  at  the 
date  of  maturity  of  the  note  and  that  the  notice  did 


1 86       CASES  ON  NEGOTIABLE   INSTRUMENTS 

not  reach   him.     This   action  was   brought  to  hold 
Vaughan  liable  as  indorser  upon  the  note. 

(7)  Farnsworth  v.   Allen,  4  Gray  (Mass.)  453.— 
The  holder  of  a  certain  negotiable  instrument  did  not 
know  the  place  of  residence  of  the  maker  and  gave 
the    instrument    to    a    notary    for    collection.     The 
notary,   after  making  due  inquiry,   ascertained  the 
maker's  place  of  residence  and  arrived  there  at  nine 
in  the  evening.     The  maker  and  his  family  had  re- 
tired for  the  night,  but  he  answered  the  bell,  and  upon 
the  note  being  presented,   refused   payment.     This 
action  was  brought  to  recover  the  amount  of  the  in- 
strument from  the  indorser  who  contends  that  there 
was  no  proper  presentment. 

(8)  Simpson  v.  Turney,  5  Humph.  (Tenn.)  419. — A 
certain  bank  was  the  holder  of  a  promissory  note 
payable  at  said  bank,  made  by  James    H.  Jenkins 
and  Anthony  Debrell,  and  indorsed  as  follows  :  "  A. 
Debrell,   S.    Turney,  John  W.    Simpson."     Turney 
lived    within    one    mile    of    the    bank.     The    note 
matured  on  February  1st  and  was  protested  on  that 
day.     On  February  3d  notice  was  sent  to  Turney 
from  the  bank.     Simpson,  the  next  indorser  after 
Turney,  had  been  notified  of  the  failure  of  the  maker 
to  pay  the  note  but  gave  no  notice  to  Turney,  the 
prior    indorser.     Simpson,    after    paying    the    note, 
brought  this  action  against  Turney  to  recover  the 
amount  paid. 

(9)  Smith  v.  Poillon,  87  N.  Y.  590.  —  In  this  case  a 
holder  notified  a  third  indorser  on  an  instrument  and 


CASES  ON   NEGOTIABLE   INSTRUMENTS      187 

inclosed  with  it  notices  for  the  second  and  first  in- 
dorsers.  The  third  indorser  sent  the  notice  to  the 
second  and  inclosed  a  notice  for  the  first.  The 
second  indorser  received  his  notice  on  the  6th  and 
mailed  the  notice  to  the  first  indorser  on  the  7th  in 
time  to  go  on  the  mail  leaving  at  1.30  P.M.  It  was 
shown  that  there  was  an  earlier  mail  leaving  at  9.30 
A.M.,  and  the  defendant  who  was  the  first  indorser 
contended  that  the  notice  should  have  been  sent 
by  that  mail. 

(10)  DeWitt  v.  Perkins,  22Wis.  473. — The  plaintiff, 
DeWitt,  was  acquainted  with  Perkins,  the  defendant, 
and  knew  that  he  was  a  responsible  party.  DeWitt 
purchased,  shortly  before  maturity,  a  promissory 
note  made  by  Perkins  for  $300,  and  paid  $5  for  it. 
On  the  trial  it  appeared  that  the  note  was  void  for 
want  of  consideration  as  between  the  original  parties. 
DeWitt  claimed  he  was  a  bona  fide  holder  for  value, 
and  as  such,  was  entitled  to  recover  on  the  note. 

(n)  O'Callaghanv.  Sawyer,  5  Johns  (N.  Y.),  118.- 
The  plaintiff  in  this  action  was  the  indorsee  of  a 
note  made  by  defendant.  Defendant  offered  to 
prove  a  counterclaim  as  his  defense  and  proved  that, 
at  the  time  of  the  transfer  of  the  note  to  the  plaintiff, 
it  was  long  overdue. 

(12)  Chapman  v.  Rose,  56  N.  Y.  137.  —  Rose  entered 
into  a  contract  with  a  person  by  the  name  of  Miller 
to  act  as  agent  for  the  sale  of  a  hay  fork,  and  a  con- 
tract was  signed  by  both.  Rose  also  signed  an  order 
for  one  hay  fork.  Miller  then  presented  another 


1 88      CASES  ON  NEGOTIABLE   INSTRUMENTS 

paper  to  Rose,  saying  that  it  was  a  duplicate  of  the 
order.  Rose  signed  it  without  reading  it  or  examin- 
ing it.  It  later  appeared  that  the  second  paper 
signed  by  Rose  was  a  promissory  note  instead  of  a 
duplicate  of  his  order.  The  plaintiff  in  this  case 
purchased  the  note  for  value  before  maturity  and  in 
good  faith,  and  now  seeks  to  recover  on  it. 

(13)  Draperv.  Wood,  112  Mass.  315. — A  promis- 
sory note  was  made  by  George  A.  Wood  and  H.  S. 
Higgins  and  read,  "  For  value  received  I  promise  to 
pay  L.  L.  Draper  or  order  $1000  on  demand,  with 
interest/'  Higgins  refused  to  pay  the  instrument  on 
the  ground  that  Wood,  without  Higgins's  knowledge, 
changed  "  I  "  to  "  We  "  and  added  the  words,  "at 
12%."  It  was  proven  that  Wood  made  the  changes 
in  good  faith  but  without  consulting  Higgins. 
Draper  brings  this  action  as  payee  of  the  instrument. 


LESSON  L 
INDEMNITY    CONTRACTS  — FIRE    INSURANCE 

97.  DEFINITION. 

98.  PARTIES  AND  THE  CONTRACT. 

99.  INSURABLE  INTEREST. 

100.  APPLICATION  FOR  INSURANCE. 

97.  Definition  and  Explanation.  —  Fire  insurance 
is  a  contract  of  indemnity  against  damage  to  prop- 
erty by  fire.  The  risk  involved  in  the  ownership 
of  buildings  is  so  great  under  modern  conditions,  that 
individual  owners  do  not  care  to  assume  the  risk 
alone.  Insurance  companies  have  been  organized 
for  the  purpose  of  carrying  a  part  of  the  risk  for  a 
stipulated  sum  called  the  premium.  There  are  two 
kinds  of  companies  called  mutual  and  stock.  In  the 
mutual  company  all  of  the  persons  whose  property 
is  insured  contribute  a  pro  rata  amount  to  pay  the 
losses  that  are  sustained  by  any  of  them,  and  the 
expenses  of  conducting  the  business.  Each  person 
carrying  insurance  has  a  right  to  vote  for  officers  in  a 
mutual  company. 

A  stock  insurance  company  is  one  that  is  organized 
by  individuals  to  conduct  the  business  of  insurance 

189 


190  INDEMNITY  CONTRACTS 

for  their  joint  profit  on  the  same  general  plan  as  any 
other  business.  A  definite  premium  is  charged  those 
who  insure,  and  whatever  is  left,  after  the  losses  and 
expenses  are  paid,  is  distributed  among  the  stock- 
holders of  the  company  in  the  form  of  dividends. 

98.  Parties  and  the  Contract. -- The  company 
that  issues  the  insurance  policy  is  called  the  insurer 
and  the  person  whose  interest  is  being  protected  by 
the  insurance  is  called  the  insured. 

The  contract  between  the  insured  and  the  insurer 
is  known  as  a  policy  when  it  is  reduced  to  writing. 
Except  in  states  where  by  statute  the  contract  is 
required  to  be  in  writing,  it  may  be  oral.  It  is  not 
necessary  that  the  policy  be  actually  written  and 
delivered,  so  long,  as  the  agreement  has  been  entered 
into  and,  when  required,  has  been  evidenced  by  some 
memorandum.  For  example,  A  goes  to  B,  an  in- 
surance agent,  and  makes  an  agreement  with  him 
for  an  insurance  policy  on  his  house.  All  of  the  essen- 
tial conditions  are  agreed  upon  and  the  premium 
stated,  whereupon  B,  upon  receipt  of  the  premium 
from  A,  hands  him  a  temporary  receipt,  and  all  that 
remains  to  be  done  is  to  prepare  and  deliver  the 
policy.  The  insurance  is  in  force  from  that  time, 
and,  if  the  building  should  burn  before  the  company 
has  forwarded  the  policy,  the  insured  can  collect 
the  amount  lost,  or  such  a  part  of  it  as  is  covered 
by  the  insurance  agreement.  In  order  to  secure 
uniformity,  a  standard  policy  has  been  adopted  in  a 
great  many  of  the  states.  It  often  happens  that 


FIRE   INSURANCE  191 

several  companies  carry  insurance  on  the  same 
property,  and  as  will  be  seen  later,  they  share  the 
loss,  in  case  of  its  destruction,  in  proportion  to  the 
amounts  of  their  policies.  Since  this  is  done,  it  is 
very  desirable  that  all  policies  be  alike  in  their  prin- 
cipal provisions. 

99.  Insurable  Interest.  —  No  person  may  take  out 
insurance  who  has  not  an  insurable  interest  in  the 
property  to  be  insured.  Any  person  who  sustains 
such  a  relation  toward  property  that  its  destruction 
would  entail  a  financial  loss  is  said  to  have  an  in- 
surable interest.  If  persons  who  have  no  insurable 
interest  in  the  property  were  allowed  to  insure  it,  a 
premium  would  be  put  on  the  destruction  of  the 
property,  and  mere  speculation  would  be  encouraged. 
This  would  not  only  tend  to  interfere  with  the  rights 
of  individual  owners,  but  would  also  tend  to  en- 
danger the  property  of  the  entire  community. 

Several  people  may  have  an  insurable  interest  in 
the  same  property.  For  example,  A  owns  a  house 
and  rents  it  to  B.  C  has  a  mortgage  on  the  house. 
In  case  the  house  is  destroyed  by  fire,  A,  B,  and  C 
would  all  lose.  This  gives  each  an  insurable  in- 
terest which  may  be  protected  by  insurance.  In 
case  the  house  were  destroyed  and  A  only  had  an 
insurance  policy  upon  the  house,  he  only  would  be 
entitled  to  recover  on  that  policy.  The  lessee  and 
mortgagee  should  protect  their  interest  by  separate 
policies,  but  in  the  case  of  mortgaged  property  the 
policy  usually  states  that  the  insurance  shall  be 


192  INDEMNITY  CONTRACTS 

payable    to    the    mortgagee    as    his    interest    may 
appear. 

100.  Application  for  Insurance.  —  When  an  ap- 
plication is  made  for  insurance,  a  description  of  the 
property  is  given,  including  location,  materials  of 
which  it  is  built,  use  that  is  made  of  it,  ownership, 
etc.  When  these  statements  regarding  the  prop- 
erty are  made  separately  from  the  contract  of  in- 
surance, they  are  known  as  representations  and  need 
be  only  approximately  true.  If,  however,  they  are 
made  in  a  formal  application  which  is  incorporated 
into  and  made  a  part  of  the  policy,  they  become  war- 
ranties, and  must  be  literally  true.  If  any  warranty 
is  untrue,  the  policy  will  be  avoided.  For  example, 
A  is  insuring  his  warehouse.  In  the  conversation 
between  himself  and  B,  he  is  asked,  "  How  far  from 
the  warehouse  is  the  nearest  railroad  track  ?  "  He 
replies,  "  Fifty  feet."  If,  after  the  policy  has  been 
issued,  it  is  found  by  measurement  that  the  track  is 
forty  feet  from  the  warehouse  instead  of  fifty  feet, 
this  inaccuracy  will  have  no  effect  upon  the  policy. 
If,  however,  the  statement  that  the  building  was  fifty 
feet  from  the  track  had  been  made  in  the  formal 
application  for  insurance  in  reliance  upon  which  the 
policy  had  been  issued,  and  the  application  had  been 
made  a  part  of  the  policy,  a  slight  inaccuracy  of 
even  one  foot  would  be  sufficient  to  avoid  the  policy. 


FIRE   INSURANCE  193 

LESSON  LI 
FIRE   INSURANCE  —  CONTINUED 

101.  IMPORTANT  CLAUSES. 

102.  RENEWAL. 

103.  PROOF  OF  Loss. 

104.  SUMMARY. 

loi.  Important  Clauses.  —  The  standard  insurance 
policy  insures  against  loss  by  fire.  This  includes 
damage  done  by  water  used  in  an  attempt  to  extin- 
guish fire,  and  also  loss  which  occurs  through  the 
stealing  of  property  after  it  has  been  removed  from 
the  building,  providing  the  owner  had  used  due  care 
in  protecting  it.  For  example,  the  furniture  is  re- 
moved from  a  burning  house  and  before  a  guard  can 
be  placed  over  it,  some  valuable  pieces  are  stolen. 
The  owner  is  entitled  to  recover  the  value  of  the 
stolen  property  on  the  insurance  policy.  If,  how- 
ever, the  property  is  left  in  the  street  unprotected  for 
an  unreasonable  time,  and  loss  occurs,  no  insurance 
can  be  recovered. 

Lightning  clause.  -  -  The  standard  policy  does  not 
insure  against  loss  which  occurs  through  lightning 
where  ignition  does  not  result.  If  lightning  strikes 
a  building  and  sets  fire  to  it,  the  damage  can  be  re- 
covered without  a  special  lightning  clause,  but  if  it 
merely  damages  the  property  without  setting  fire  to 
it,  no  insurance  can  be  recovered.  There  is  some- 


194  INDEMNITY  CONTRACTS 

times  added  a  lightning  clause  which  provides  that 
loss  by  lightning  may  be  recovered. 

Pro  rata  clause.  -  -The  standard  policy  contains 
the  pro  rata  clause  which  provides  that  where  more 
than  one  company  is  carrying  insurance  on  a  piece 
of  property,  each  will  pay  such  a  part  of  the  loss  as 
his  insurance  is  of  the  whole  insurance  at  the  time  of 
the  fire.  It  should  be  stated,  however,  that  the 
standard  policy  further  provides  that  additional 
insurance  with  other  companies  may  not  be  taken 
out  without  the  consent  of  the  first  company.  This 
is  to  prevent  overinsurance.  It  is  against  public 
policy  to  permit  owners  to  insure  their  property  for 
all  or  more  than  it  is  worth.  Overinsurance  tends 
to  make  people  careless  with  their  property  and  may 
also  encourage  dishonest  persons  to  destroy  it  for 
the  insurance. 

Vacancy  clause.  —  It  is  usually  provided  that  if 
the  property  remains  vacant  and  unoccupied  for  a 
certain  length  of  time,  usually  ten  days,  the  policy 
shall  become  void.  This  does  not  apply  to  tempo- 
rary absence  on  a  visit,  but,  if  an  owner  is  to  be  away 
from  his  property  for  a  considerable  length  of  time, 
he  should  go  to  his  agent  and  secure  a  vacancy  per- 
mit which  will  be  granted  to  him  and  which  may  be 
attached  to  his  policy. 

Alienation  and  cancellation  clause.  —  Another  clause 
provides  that  if  there  is  any  change  in  interest,  title, 
or  possession,  the  policy  becomes  void  unless  the 
company  assents  to  such  change.  It  is  better,  how- 


FIRE   INSURANCE  195 

ever,  to  have  the  policy  canceled  under  the  can- 
cellation clause  which  provides  that  the  insured  may 
request  the  cancellation  of  a  policy  at  any  time  upon 
giving  the  company  notice,  and  the  company  may 
also  cancel  the  policy  at  any  time  upon  giving  notice. 
When  a  policy  is  canceled  under  the  cancellation 
clause,  the  insured  is  entitled  to  a  refund  of  such  part 
of  the  premium  as  has  not  been  earned. 

Rebuilding  clause.  --  It  is  usually  provided  that 
in  case  of  total  destruction  of  the  property  the 
insurance  company  shall  have  the  right  to  re- 
build, and  under  this  clause  the  company  may  re- 
build instead  of  making  payment  in  money  for 
the  loss. 

102.  Renewal.  --  When  the  term  of  insurance  has 
expired,  it  is  customary  to  renew  the  policy  by  having 
a  brief  renewal  receipt   attached  to  the  old  policy 
giving  it  effect   for   a   new  term.     This   does   away 
with  the  necessity  of  writing  a  new  policy  covering 
the  same  property. 

103.  Proof  of  Loss.  —  Immediately  after  loss  has 
occurred   it   is   necessary  for  the  owner  to   file   his 
claim,  together  with  proof  of  loss,  with  the  company 
through  their  agent.     In  important  cases  the  com- 
pany will  send  an  adjuster  whose  business  it  is  to 
ascertain  the  exact  extent  of  the  loss  and  report  his 
finding  as  a  basis  for  settlement.     It  should  be  em- 
phasized  that,    no   matter   how   much   insurance   is 
carried  on  the  property,  nothing  can  be  recovered 


196  INDEMNITY  CONTRACTS 

beyond  the  amount  of  loss  which  can  be  actually 
proved.  In  view  of  this  fact,  it  is  very  desirable  that 
one  having  property  insured,  particularly  personal 
property,  should  prepare  and  keep  on  file  an  inven- 
tory showing  exactly  the  amount  and  value  of  the 
property.  When  this  is  done,  it  is  a  comparatively 
easy  matter  to  prove  the  entire  loss,  otherwise  many 
items  may  be  forgotten  and  only  partial  loss  be  re- 
covered. 

104.  Summary.  —  In  fire  insurance  the  one  seek- 
ing insurance  should  know  the  agent  and  the  com- 
pany, and  he  should  thoroughly  understand  his 
policy  in  accordance  with  the  terms  of  which  settle- 
ment will  be  made  in  case  of  loss. 


LESSON  LII 
LIFE  INSURANCE 

105.  DEFINITION  AND  EXPLANATION. 

106.  PARTIES  AND  THE  CONTRACT. 

107.  INSURABLE  INTEREST. 

108.  APPLICATION  FOR  INSURANCE. 

105.  Definition  and  Explanation.  —  Life  insurance 
is  an  indemnity  against  loss  occurring  through  the 
death  of  a  person.  A  company  agrees  to  assume  the 
risk  of  loss  upon  payment  of  a  certain  amount,  called 
a  premium,  and  the  amount  of  insurance  may  be  paid 


LIFE   INSURANCE  197 

in  one  sum  upon  the  death  of  the  insured,  or  in  in- 
stallments which  may  continue  for  a  stated  length  of 
time.  There  are  a  great  many  different  forms  of  in- 
surance, and  the  cost  depends  upon  the  risk  involved, 
and  the  plan  according  to  which  the  insurance  is  to  be 
paid. 

106.  Parties    and     the     Contract. -- The    person 
whose  life  is  insured  is  called  the  insured,  and  the 
company  who  undertakes  to  pay  the  indemnity  in 
case  of  loss  is  called  the  insurer,  and  the  one  for  whose 
benefit  the  insurance  is  taken  out,  is  called  the  bene- 
ficiary:   It  is  very  important  that  persons  who  in- 
sure their  lives  should  understand   that  the  policy 
which  is  given  them  is  a  contract  between  the  com- 
pany and  themselves,  and  that  agents  have  no  author- 
ity to  vary  the  terms  of  this  contract  in  any  partic- 
ular.    One  who  receives  an  insurance  policy  should 
read  it  very  carefully  and  be  sure  that  he  under- 
stands all  its  terms. 

107.  Insurable  Interest.  —  An   insurable  interest 
exists  when  one  person  would  suffer  a  financial  loss 
upon  the  death  of  another  person.     A  creditor  may 
insure  the  life  of  his  debtor,  or  a  son  or  daughter 
may  insure  the  life  of  a  parent.     No  one  who  has  no 
insurable   interest   can   insure   the   life   of   another. 
Insurable  interest  must  exist  at  the  time  the  insurance 
is  taken  out,  but  the  insurance  may  be  continued 
even   though   the   insurable   interest   has   ceased   to 
exist.     A   debtor   whose   life    has    been   insured    by 


198  INDEMNITY   CONTRACTS 

his  creditor  may  pay  his  debt  and  in  this  way 
extinguish  the  insurable  interest  of  the  creditor 
in  his  life,  but  this  does  not  prevent  the  creditor 
from  continuing  the  insurance  in  order  that  he 
may  ultimately  receive  back  what  the  insurance 
has  cost  him. 

108.  Application  for  Insurance.  —  An  application 
for  insurance  is  usually  made  on  a  blank  form  pro- 
vided by  the  insurance  company.  Questions  are  asked 
concerning  the  health  of  the  applicant,  the  kind 
of  work  in  which  he  is  engaged,  his  family  history, 
and  all  other  matters  which  would  tend  to  affect  the 
risk.  An  applicant  must  be  very  careful,  in  answer- 
ing these  questions,  that  he  does  not  deviate  in  any 
degree  from  the  exact  truth.  The  application  is 
made  the  basis  for  the  insurance  contract,  and  the 
application  is  also  made  a  part  of  the  insurance  policy. 
Every  answer  given  in  the  application  is  a  warranty 
and  must  be  literally  true.  In  case  any  answers  are 
incorrect,  the  policy  will  be  void  immediately.  If 
any  of  the  questions  contained  in  the  application 
blank  are  not  answered,  and  the  company  issues  the 
policy  without  requiring  answers  to  them,  it  is  under- 
stood that  the  company  has  waived  its  right  to  have 
the  questions  answered,  and  the  policy  will  not  be 
affected  by  the  applicant's  failure  to  answer.  One 
who  is  not  in  good  health  should  not  apply  for  in- 
surance until  fully  restored  to  health,  as  it  is  quite 
certain  that  any  reliable  company  will  reject  his 
application  if  evidence  of  poor  health  is  found,  and 


LIFE   INSURANCE  199 

once  having  been  rejected,  it  becomes  more  difficult 
to  secure  insurance  thereafter. 


LESSON   LIII 
-LIFE   INSURANCE  —  CONTINUED 

109.  KINDS  OF  INSURANCE. 

no.  SURRENDER  VALUE. 

in.  SUMMARY,  AND  CASUALTY  INSURANCE. 

109.  Kinds  of  Insurance. -- There  are  many  dif- 
ferent kinds  of  insurance  policies,  and  in  taking  out 
insurance,  one  should  be  very  careful  to  understand 
the  nature  of  the  policy  which  he  is  purchasing. 
Any  statements  made  by  the  agent  regarding  the 
conditions  or  terms  of  insurance  are  of  no  effect,  as 
far  as  the  company  is  concerned,  if  they  are  not  in- 
corporated in  the  policy  that  is  issued  by  the  com- 
pany and  accepted  by  the  applicant.  The  life  insur- 
ance agent  has  much  less  authority  than  has  the  fire 
insurance  agent,  and  life  insurance  does  not  take  effect 
until  the  policy  is  issued  and  the  premium  paid  or 
arranged  for  in  accordance  with  the  rules  of  the 
company.  Among  the  more  important  kinds  of  life 
insurance  policies  are  the  following : 

Straight  Life  Policy.  -  -  This  policy  provides  for  the 
payment  of  a  certain  sum  to  the  beneficiary  upon 
the  death  of  the  insured,  providing  premiums  shall 
be  paid  at  stated  intervals  during  the  life  of  the  in- 


200  INDEMNITY  CONTRACTS 

sured,  and  the  policy  shall  not  be  avoided  for  any 
reason  prior  to  the  death  of  the  insured. 

Endowment  Policy.  -  -  The  Endowment  Policy  is 
one  which  provides  for  the  payment  of  a  certain  sum 
of  money  to  the  insured  at  the  expiration  of  a  given 
time,  or  to  a  designated  beneficiary,  in  case  the  in- 
sured dies  before  the  expiration  of  the  endowment 
period,  provided  the  premiums  have  been  paid  in  ac- 
cordance with  the  terms  of  the  contract.  This  kind  of 
insurance  is  more  expensive  than  the  other  kind  as  it 
is  payable  at  the  expiration  of  a  given  time  rather  than 
at  the  death  of  the  insured  which  may  occur  many 
years  after  the  endowment  period  has  been  passed. 

Limited  Payment  Life  Policy. --The  Limited 
Payment  Life  Policy  is  one  which  provides  for  the 
payment  of  a  certain  sum,  at  the  death  of  the  insured, 
to  a  designated  beneficiary,  upon  condition  that  an- 
nual premiums  shall  be  paid  each  year  for  a  specified 
number  of  years,  or  until  the  death  of  the  insured, 
if  he  dies  before  the  expiration  of  that  time.  For 
example,  a  twenty-payment  life  policy  is  one  in  which 
the  insured  pays  an  annual  premium  every  year,  for 
twenty  years,  at  the  expiration  of  which  time  the 
policy  is  paid  up  and  no  more  premiums  can  be  called 
for.  The  beneficiary,  however,  does  not  .  receive 
any  money  from  the  company  until  the  death  of  the 
insured.  The  advantage  of  this  form  of  insurance  is 
that  the  premiums  are  paid  during  the  earlier  years 
of  the  insured's  life  and  thus  protection  is  secured  for 
his  family  before  his  earning  capacity  has  become  less. 


LIFE  INSURANCE  201 

In  nearly  all  kinds  of  insurance  the  policy  may  pro- 
vide for  payment  on  the  installment  plan  rather  than 
in  a  lump  sum.  An  insured  may  designate  that  his 
beneficiary  be  paid  so  much  per  year  instead  of  being 
paid  a  certain  amount  at  his  death,  and  when  this 
form  of  payment  is  contracted  for  by  the  insured,  the 
premiums  are  slightly  smaller  than  when  the  pay- 
ment is  to  be  made  at  one  time.  In  this  way  one 
may  secure  a  life  income  for  those  dependent  on  him 
and  guard  against  the  possibility  of  loss  through  poor 
investments  of  insurance  money. 

no.  Surrender  Values.  —  In  all  policies  written 
by  the  best  life  insurance  companies  to-day,  there 
are  surrender  value  tables  given  at  the  end  of  the 
policy.  In  these  tables  it  is  provided  that  upon  the 
surrender  of  the  policy  any  time  after,  two  or  three 
years,  a  certain  amount  of  cash  can  be  received  for 
it  from  the  company.  This  is  known  as  the  cash 
surrender  value.  An  equal  amount  of  cash  can  be 
borrowed  from  the  company  upon  sending  the  policy 
to  them  for  indorsement.  This  is  called  the  loan 
value.  This  loan  will  draw  a  stated  amount  of  in- 
terest and  can  be  paid  off  at  any  time  at  the  option 
of  the  insured.  The  table  also  provides  that  the  in- 
sured may  surrender  the  policy  at  any  time,  and,  in 
its  place,  take  a  paid-up  policy  in  which  the  company 
agrees  to  pay  a  certain  amount  to  the  beneficiary,  at 
the  death  of  the  insured,  without  the  payment  of 
further  premiums.  Another  option  provided  for  in 
the  table  is  what  is  known  as  extended  insurance. 


202  INDEMNITY  CONTRACTS 

Under  this  option,  if  the  insured  fails  to  pay  the 
premiums  when  they  become  due,  the  policy  will  be 
carried  without  further  payment  for  a  certain  length 
of  time  specified  in  the  table.  If,  for  example,  A 
has  paid  twenty  annual  premiums  on  a  life  policy 
and  then  ceases  to  pay  any  more  premiums,  the  pol- 
icy will  be  continued  by  the  company,  in  full  force, 
for  so  long  a  time  as  the  surrender  value  at  the  date 
of  default  in  the  payment  of  premium  will  carry  it. 
It  will  be  understood,  from  the  study  of  this  table, 
that  the  policy  does  not  cease  to  have  value  if  the 
premiums  are  not  paid,  as  was  the  case  before  these 
options  were  given. 

One  of  the  four  options  referred  to  above  is  auto- 
matic, and  it  is  important  that  a  policy  holder  study 
his  policy  carefully  and  ascertain  which  one  of  the 
four  is  the  automatic  one.  In  some  policies,  if  the 
premium  is  not  paid  when  due  and  no  choice  is  in- 
dicated by  the  insured,  the  company  will  immediately 
consider  the  policy  as  being  carried  on  the  extended 
insurance  option.  Other  policies  provide  that  when 
no  choice  is  made  and  the  premiums  are  not  paid, 
the  paid-jup  policy  is  to  be  substituted  for  the  one 
which  has  been  allowed  to  lapse.  All  modern  policies 
provide  for  a  certain  number  of  days  in  which  to  pay 
the  premium,  without  interest,  and  the  provisions  of 
the  policy,  in  this  and  all  other  matters,  should  be 
thoroughly  understood  by  the  insured. 

When  the  policy  is  made  out  in  favor  of  the  insured, 
it  is  payable  to  his  estate,  upon  his  death,  and  may  be 


LIFE   INSURANCE  203 

attached  the  same  as  any  other  property  for  the 
benefit  of  his  creditors.  If  it  is  made  out  in  favor  of 
another  person  as  the  beneficiary,  the  insured's  credi- 
tors cannot  reach  it,  and  the  insurance  money  cannot 
be  paid  to  any  person  other  than  the  one  specified  in 
the  policy.  The  beneficiary  has  a  vested  interest  at 
once,  which  he  may  assign  and  which  is  subject  to 
his  debts,  and,  unless  otherwise  provided  in  the  pol- 
icy, it  is  necessary  to  secure  his  consent  if  the  insured 
desires  to  change  the  beneficiary.  If  the  beneficiary 
dies  before  the  insured,  and  no  other  beneficiary  is 
substituted  by  the  insured,  the  policy  becomes  pay- 
able to  the  beneficiary's  personal  representative, 
unless  otherwise  provided  in  the  policy. 

in.  Summary,  and  Casualty  Insurance. —  Before 
buying  insurance,  decide  whether  you  wish  to  buy  for 
protective  or  investment  purposes,  and  then  select  the 
kind  of  policy  that  will  give  you  the  maximum  pro- 
tection or  investment  return,  according  to  your  choice, 
at  the  least  cost  consistent  with  safety.  Select  your 
company  with  great  care  and  analyze  your  policy 
before  accepting  and  paying  for  it,  to  satisfy  your- 
self that  you  are  getting  what  you  contracted  for. 

Casualty  Insurance  is  a  form  which  acts  as  an 
indemnity  against  loss  resulting  from  personal  in- 
jury, or  from  the  destruction  of  certain  kinds  of 
property,  or  from  certain  obligations  which  one  may 
have  toward  another. 

Among  the  different  kinds  of  casualty  insurance 
are  the  following : 


204  INDEMNITY  CONTRACTS 

Accident  Insurance.  —  In  this  branch  of  insurance 
the  policy  provides  for  the  payment  of  a  certain 
amount  upon  the  death  of  the  insured  by  reason  of  an 
accident.  In  case  of  accidental  injury  resulting  in 
loss  of  time  and  expense  for  medical  service,  the  policy 
usually  provides  for  the  payment  of  a  certain  weekly 
indemnity  and  certain  other  amounts  for  surgical 
operations,  hospital  expenses,  etc. 

Employers'  Liability  Insurance.  —  An  employer 
of  men  in  a  manufacturing  business  very  often  is 
sued  for  damages  by  one  of  his  employees  who  has 
been  injured  while  in  his  service.  It  is  customary 
for  large  employers  of  labor  to  insure  against  the 
possibility  of  having  to  pay  such  damages.  Such 
insurance  is  called  employers'  liability  insurance. 
When  an  accident  occurs  in  the  factory  of  one  carry- 
ing such  insurance,  an  action  brought  against  the 
employer  for  damages  is  defended  by  the  insurance 
company,  and,  if  the  employer  is  defeated,  the  in- 
surance company  pays  the  loss. 

Fidelity  Insurance.  —  One  who  is  employed  in  a 
position  of  responsibility  and  trust  is  frequently  re- 
quired to  furnish  bonds  to  his  employer  as  a  guaranty 
that  he  will  perform  his  duties  honestly.  Formerly, 
responsible  individuals  guaranteed  the  honesty  of 
the  employee.  At  the  present  time,  insurance  com- 
panies assume  the  risk,  upon  the  payment  of  a  certain 
premium  by  the  insured  employee. 

Credit  Insurance.  —  Experience  shows  that,  in 
nearly  every  business  in  which  goods  are  sold  on 


LIFE  INSURANCE  205 

credit,  a  certain  per  cent  of  the  goods  are  never  paid 
for,  through  the  insolvency  or  dishonesty  of  some  of 
the  debtors.  To  provide  against  this  loss,  it  is  cus- 
tomary to  pay  an  indemnity  company  to  assume  the 
risk  of  such  losses. 

Title  Insurance.  —  It  is  often  difficult  to  trace  the 
title  to  real  property  satisfactorily,  and  when  this  is 
the  case,  the  purchaser  insists  on  having  the  title 
to  the  property  insured.  The  insurance  company 
makes  a  careful  investigation,  and  if  satisfied  that 
the  title  is  clear,  insures  the  property  against  liens 
or  incumbrances. 

Elevator  Insurance.  —  It  is  customary  for  owners 
of  buildings  in  which  passenger  elevators  are  located 
to  insure  against  loss  as  a  result  of  accident  in  the 
use  of  the  elevator.  This  includes  loss  as  a  result  of 
injury  to  persons  riding  in  the  elevator  and  also 
damage  to  the  elevator  itself. 

Marine  Insurance.  — Owners  of  vessels,  or  of  goods 
shipped  thereon,  that  are  exposed  to  maritime  perils, 
usually  insure  themselves  against  loss  therefrom. 
Though  known  as  "  Marine  "  insurance,  the  contract 
is  frequently  extended  to  cover  risks  on  inland  waters, 
and  covers,  besides  perils  of  the  seas,  war  perils,  loss 
by  pirates,  thieves,  captures,  seizures,  jettisons, 
barratry,  etc. 

There  are  a  great  many  other  kinds  of  insurance, 
and  it  may  be  stated  that,  wherever  there  is  a  possi- 
bility of  financial  loss,  the  risk  of  such  loss  may  be 
covered  by  casualty  insurance  of  one  kind  or  another. 


206  CASES   ON   INSURANCE 

LESSON   LIV 
112.   CASES  ON  INSURANCE 

(1)  Cross    v.    National   Fire    Insurance    Co.,    132 
N.  Y.  133.  —  The  plaintiff  had  a  building  conveyed  to 
him  in  trust,  to  sell  it  and  distribute  the  proceeds, 
after  deducting  his  commission.     He  agreed  to  care 
for  the  property,  rent  it,  and  keep  it  insured  pending 
a  sale.     The  building  was  insured  in  the  name  of 
"  Sidney  S.  Cross,  Trustee."     The  building  burned 
and    the    insurance    company    refused    to    pay   the 
amount  of  the  policy  on  the  ground  of  lack  of  in- 
surable  interest. 

(2)  Huber  v.  Manchester  Fire  Assurance  Co.,  92 
Hun  (N.  Y.),  223. — The  plaintiff  insured  the  fur- 
niture in  her  house  for  $1500.     The  policy  contained 
a  provision  that  the  entire  policy  should  be  void  if 
the  building  described  was  or  became  vacant  or  un- 
occupied and  so  remained  for  ten  days.     On  the  24th 
of  August,  the  plaintiff  went  away  on  a  visit,  intend- 
ing to  be  away  five  or  six  weeks.     Before  she  left, 
she  arranged  to  have  the  house  papered  and  painted, 
and  a  friend  of  hers  went  to  the  house  frequently 
to  see  how  things  were.     The  house  and  furniture 
burned  on  September  i8th,  and  the  plaintiff  brought 
suit  on  her  policy. 

(3)  Germania  Fire  Insurance  Co.  v.   Home  Insur- 
ance Co.,  144  N.  Y.  195. — The  defendant  issued  a 
policy  of  insurance  to  one  Verdier  on  his  stock  of 


CASES   ON   INSURANCE  207 

hardware,  the  policy  containing  a  provision  that  if 
the  property  was  sold  or  transferred,  or  a  change 
took  place  in  title  or  possession,  the  policy  should  be 
void.  During  the  life  of  the  policy,  Verdier  formed 
a  partnership  with  one  Brown,  selling  him  a  three- 
tenths  interest  in  the  insured  property.  The  hard- 
ware was  destroyed  by  fire,  and  the  plaintiff  sued  on 
the  policy  as  assignee  of  Verdier. 

(4)  Kenniston  v.  Merrimac  County  Mutual  Insur- 
ance Co.,  14  N.  H.   341. — The  plaintiff  insured  his 
house  with  the  defendant,  the  terms  of  the  policy 
being  to  pay  for  any  loss  by  fire  caused  by  accident, 
lightning,  or  any  other  means  except  design,  invasion, 
or  insurrection.     The  house  was  struck  by  lightning, 
different  parts  of  it  were  materially  injured,  articles 
of  glass,  china,  etc.,  were  broken,  and   at  the  place 
where  the  lightning  struck,  the  wood  was  discolored 
and  blackened  as  by  fire.     The  defendant  refused  to 
pay  the  loss,  claiming  that  it  was  not  covered  by  the 
policy. 

(5)  Boruszweski  v.   Middlesex   Mutual   Assurance 
Co.,  186  Mass.  589.  — The  plaintiff  insured  his  house 
and  barn  with  the  defendant,  the  policy  being  in  the 
usual  form.     The  premises  burned,  but  the  company 
did  not  pay  the  loss  on  demand.     The  plaintiff  then 
brought  suit  on  the  policy,  without  taking  any  other 
steps  to  secure  payment. 

(6)  Walker  v.   Larkin>  127  Ind.  100.  —  Larkin  in- 
sured his  life  for  $1000.     The  policy  was  an  endow- 
ment policy,  payable  in  twenty  years.     Walker  ob- 


208  CASES  ON  INSURANCE 

tained  two  judgments  against  Larkin,  and  Larkin 
assigned  the  policy  to  him  as  security  for  the  judg- 
ments. Walker  paid  the  premiums  on  the  policy 
and  kept  it  alive  until  it  matured,  when  Larkin  dis- 
puted his  right  to  the  proceeds  of  the  policy  on  the 
ground  that  Walker  had  no  right  to  insure  Larkin's 
life.  The  insurance  company  paid  the  money  into 
court  pending  a  decision. 

(7)  Potter  v.  Spilman,  117  Mass.  322.  —  Plaintiff 
took  out  a  policy  of  insurance  on  his  life,  payable  to 
defendant,  his  sister.     She  knew  nothing  about  the 
matter,  never  had  the  policy,  was  not  dependent  on 
her  brother,  nor  was  she  a  creditor,  the  policy  being 
intended    purely    as    a   gift.     After   some   time   the 
plaintiff  asked  the  defendant  to  consent  to  a  change  in 
the  beneficiary  under  the  policy,  which  she  refused 
to  do,  and  he  then  started  a  suit  to  compel  such 
consent. 

(8)  Robinson  v.  Duvall,  79  Ky.  83. — One  Crowfoot 
insured  his  life  for  the  benefit  of  his  wife  and. children 
or    their    representatives.     His    wife    and    children 
having  all  died,  he  assigned  the  policy  to  his  niece, 
Hattie  Robinson.     When  he  died,  his  executor,  his 
niece,  and  his  only  grandchild,  a  son  of  one  of  the 
original    beneficiaries    of    the    policy,    claimed    the 
proceeds. 

(9)  Fidelity  Mutual   Life   Insurance  Co.  v.   Becky 
104  S.  W.  Rep.  533.  —  Beck  made  written  application 
for  insurance  on  his  life,  in  which  he  warranted  the 
truth  of  every  statement  made.     To  a  question  re- 


CASES  ON   INSURANCE  209 

garding  the  duration  of  an  attack  of  rheumatism,  he 
made  no  answer.  The  policy  was  issued,  and  Mrs. 
Beck  brought  suit  after  Beck's  death  to  recover  the 
proceeds. 

LESSON  LV 

(1)  Loehr  v.  Royal  Arcanum,  46  N.  J.  Eq.  102  and 
1 1 2  N.  W.  Rep.  441 .  — The  plaintiff  was  a  beneficiary 
in  a  policy  issued  on  Loehr's  life.     Loehr  had  made 
a  written  application  for  insurance,  warranting  his 
answers  to  the  questions  to  be  true.     Among  other 
things  he  stated  that  he  had  once  had  rheumatism, 
whereas  in  fact  he  had  had  inflammatory  rheumatism 
three  times.     He  also  stated  that  the  beneficiary  was 
his  cousin,  whereas  he  was  a  creditor,  and  no  relation 
at  all.     Was  the  falsity  of  either  of  these  answers  a 
defense  to  an  action  on  the  policy  ? 

(2)  Kernochan  v.  Insurance  Co.,  5  Duer.  (N.  Y.) 
I. — Plaintiff  held  a  mortgage  on  certain  real  prop- 
erty including  land   and   buildings.      He  procured 
insurance  on  the  buildings  for-  the  amount  of  the 
debt  covered  by  the  mortgage.     The  buildings  were 
totally  destroyed  by  fire  and  this  action  was  brought 
to  recover  on  the  policy.     It  was  shown  that  the 
amount  of  the  insurance  was  not  in  excess  of  the 
face  of  the  mortgage.     It  was  also  proven  that  the 
land  without  the  buildings  which  were  destroyed  was 
ample  security  for  the  mortgage. 

(3)  Ellis  v.  Insurance  Co.,  50  N.  Y.  402.  —  Ellis 


210  CASES   ON   INSURANCE 

applied  to  an  insurance  agent  for  insurance  upon 
a  quantity  of  cotton.  The  amount  of  insurance 
and  the  premium  were  settled  upon  and  the  agent 
agreed  to  insure  as  requested.  Ellis  left  it  with  the 
agent  to  select  the  companies  in  which  he  would  in- 
sure, and  accordingly  the  agent  decided  to  place 
$6100  with  defendant  insurance  company,  entered 
it  upon  his  books,  and  credited  the  defendant  com- 
pany with  the  amount  of  the  premium,  which  was 
sent  to  defendant  before  the  loss  occurred.  The 
policy  had  not  yet  been  issued,  when  the  cotton 
burned. 

(4)  Paul  v.    Armenia   Insurance   Co.,  91    Pa.   St. 
520.  —  Plaintiff   took   out    insurance   with    the    de- 
fendant company,  and  in  the  application  blank  which 
he  filled  out  one  of  the  questions  was,  "  What  is  the 
distance,  occupation,   and  material  of  all  buildings 
within   1 50  feet?"      Paul  made  no   answer  to  this 
question  and  the  company  issued  the  policy  without 
insisting  upon  an  answer.     This  action  was  brought 
to  recover  on  the  policy. 

(5)  Ripley  v.  JEtna  Insurance  Co.,  30  N.  Y.  136.  - 
Ripley   insured    his    buildings    with    the    defendant 
company  and,  at  the  time  the  insurance  was  taken 
out,  plaintiff  was  asked  if  there  was  a  watchman  in 
the    buildings     during    the    night.     He     answered, 

*  There  is  a  watchman  nights."  According  to  the 
custom  at  the  mill  which  was  insured,  no  watchman 
was  on  duty  from  twelve  o'clock  Saturday  night  until 
twelve  o'clock  Sunday  night.  The  application  in 


CASES  ON   INSURANCE  21 1 

which  the  above  question  was  asked  was  made  a  part 
of  the  policy.  The  loss  having  occurred  by  fire,  this 
action  was  brought  to  recover  on  the  policy. 

(6)  White   v.   Insurance  Co.,  57  Me.  91.  — Plain- 
tiff   had    certain    personal     property   insured    with 
the  defendant.     A  building  situated  near  the  one  in 
which  the  plaintiff's  property  was  located  caught  fire, 
and  it  seemed  certain  that  the  latter  building  would 
be  destroyed.     Plaintiff  caused   his  goods  to  be  re- 
moved from  the    building   to    save   them    from  ap- 
parent immediate  destruction  by  fire,  but  the  build- 
ing in  which  they  were  did  not  burn.     A  reasonable 
degree  of  care  was  used  in  the  removal  of  the  goods. 
This  action  was  brought  to  recover  for  such  damage 
as  the  goods  sustained   and   also  for  the  expense  of 
removal. 

(7)  Babcock    v.     Montgomery     Insurance     Co.,   6 
Barb.   (N.  Y.)  637.  —  Plaintiff  insured  his  property 
with  the  defendant  company,  and  one  of  the  condi- 
tions of  the  policy  was  that  the  insurer  would  be 
liable  for  "  fire  by  lightning."     It  was  proved  that 
lightning  struck  the  building  and  so  shattered  it  as 
to  cause  a  very  heavy  loss.     No  ignition  occurred. 
This  action  was  brought  to  recover  on  the  policy. 

(8)  Lyons  v.  Insurance  Co.,  14  R.  I.  109.  —  Plain- 
tiff's  insurance   policy  was   taken  out   on   furniture 
which  was  described  as  being  contained  in  a  house  on 
McMillen  Street,  Providence,  R.  I.     Lyons  moved 
to  another  house  on  another  street  and  did  not  notify 
the  insurer.     The  property  having  been  destroyed 


212  CASES  ON  INSURANCE 

by  fire,  this  action  was  brought  to  recover  on  the 
policy. 

(9)  Sanders  v.  Cooper,  1 1 5  N.  Y.  279.  —  In  this  case 
it  was  shown  that  the  insurance  policy  contained 
the  usual  clause  providing  that  it  would  be  void  in 
case  of  other  insurance  on  the  property  insured,  not 
indorsed  on  the  policy  or  consented  to  in  writing  by 
the  insurer.  There  was  such  other  insurance  and  the 
fact  was  not  made  known  to  the  company.  Should 
the  plaintiff  recover  on  the  policy  ? 


LESSON  LVI 

(1)  Lett  v.  Insurance  Co.,  125  N.  Y.  82.  —  In  this 
case     the   insured    sold    the     property   covered    by 
the  insurance  policy  and   signed   an  instrument  in 
which  he  released  his  interest  in  the  policy  to  the 
purchaser.     The  insurance  company  was  not  notified 
of  the  transfer.     A  fire  having  occurred,  the  pur- 
chaser of  the  property  sought  to  hold  the  insurance 
company  liable  on  its  insurance  contract. 

(2)  Corrigan  v.  Insurance  Co.,  122  Mass.  298. — 
The  insurance  policy  in  this  case  contained  the  usual 
clause  that  if  the  house  insured  should  remain  vacant 
or   unoccupied   for  the   space  of  ten   days  without 
written  notice  to,  and  consent  of,  the  company,  it 
should  become  void.     It  was  shown  that  the  tenant 
had  moved  his  family  into  another  house,  in  which 
they  slept  and  took  their  meals,  but  he  still  retained 


CASES  ON  INSURANCE  213 

the  key  to,  and  left  some  of  the  furniture  in,  the 
house  covered  by  the  policy.  Upon  the  house  being 
destroyed  by  fire,  an  action  was  brought  to  recover 
of  the  company. 

(3)  Bevin     v.    Life     Insurance    Co.,     23     Conn. 
244.  —  Bevin  gave  $300  to  Barstow,  and  some  other 
articles  of  personal  property,  under  an  agreement  that 
Barstow  should  go  to  California  and  labor  there  for 
at   least   one   year    and   then  account  to    Bevin  for 
one  half  of  the  profits  of  his  labor.     Plaintiff  then 
insured  Barstow's  life  with  the  defendant  insurance 
company  for  $1000.     Barstow  died  and  this  action 
was  brought  on  the  policy. 

(4)  Connecticut    Mutual    Life    Insurance    Co.    v. 
Lucks,    108    U.   S.    498. --Two    persons    formed    a 
partnership  with  a  capital  of  $10,000,  of  which  each 
was  to  contribute  one  half.     One  of  the   partners 
being  temporarily  out  of  funds,  the  other  partner 
contributed  the  entire  amount  under  an  agreement 
that  he  should  be  reimbursed  for  the  $5000  advanced 
for  his  partner.     Upon  the  failure  of  the  partner  to 
comply  with  his   agreement,  the  one  who  had  ad- 
vanced the  money  took  out  an  insurance  policy  for 
$5000  on  his  partner's  life.     This  action  was  brought 
to  recover  on  the  policy. 

(5)  Glanzv.  Gloeckler,  104  111.  573. — A  father  took 
out  an  insurance  policy  on  his  own  life  in  favor  of  an 
infant  daughter  and  paid  all  of  the  premiums.     He 
retained  the  policy  in   his   possession.     The  father 
having  died,  the  daughter  claims  the  right  to  recover 


214  CASES  ON   INSURANCE 

on  the  policy,  and  this  action  was  brought  to  require 
the  defendant,  who  was  in  possession  of  the  policy, 
to  surrender  it  to  the  infant  daughter,  who  was  named 
in  it  as  beneficiary. 

(6)  Cushman  v.  Life  Insurance  Co.,  63  N.  Y.  404.  — 
The  insurance   policy  in    this  case   stated    that  the 
representations    made    by    the   insured    in    his     ap- 
plication were  made  a  part  of  the  contract,  and  pro- 
vided that  if  they  were  untrue  the  policy  would  be 
void.     The  applicant  stated  that  he  had  never  been 
afflicted  with  a  certain  disease.     It  was  shown  that 
he  had  twice  been  ill  with  this  disease  before  the 
policy  was  issued.     What  effect  did  his  statement 
have  upon  the  policy  ? 

(7)  Dwight  v.  Ger  mania  Life    Insurance   Co.,   103 
N.  Y.  341.  — One  of  the  questions  in  the  application 
for  the  policy  involved  in  this  case  was  as  to  whether 
or  not  the  applicant  was  then  or  had  been  engaged 
in  or  connected  with  the  manufacture  or  sale  of  in- 
toxicating liquors.     The  applicant  answered,  "No." 
In  an  action  to  recover  on  the  policy  it  was  shown 
that  the  insured  had  kept  a  hotel  for  three  and  a  half 
years  before  taking  out  the  insurance  covered  by  this 
policy,  and  that  he  had  sold  wine  and  liquors  to  his 
guests,  although  he  had  kept  no  bar. 

(8)  Raddin   v.    Phcenix  Life   Insurance    Co.,    120 
U.  S.   183. — Among  the  questions    on  the  applica- 
tion was  this  one,  "  Has  any  application  been  made 
to  this  or  any  other  company  for  insurance  on  the  life 
of  the  party  ?     If  so,  with  what  result  ?  "     The  ap- 


CASES  ON   INSURANCE  215 

plicant  made  no  answer  to  this  inquiry.  The  policy 
was  issued  by  the  company  without  insisting  on  an 
answer.  The  company  now  seeks  to  avoid  payment 
on  the  policy  on  the  ground  that  other  applications 
had  been  made  and  that  the  failure  of  the  applicant 
to  so  state  was  a  concealment  which  would  avoid  the 
policy. 

(9)  Bigelow  v.  Life  Insurance  Co.,  93  U.  S. 
284. — The  policy  in  this  case  contained  a  clause 
which  provided  that  it  should  be  null  and  void  if 
the  insured  died  by  suicide,  while  either  sane  or  in- 
sane. The  company  proved  that  the  insured  died 
from  a  pistol  wound  inflicted  by  his  own  hand  and 
that  he  intended  to  destroy  his  own  life.  Evidence 
was  offered  tending  to  show  that  the  suicide  was  a 
result  of  unsound  mind. 


LESSON  LVII 
CONTRACTS  OF  GUARANTY  AND  SURETYSHIP 

113.  EXPLANATION. 

114.  How  THE  CONTRACT  MUST  BE  MADE. 

115.  CONSIDERATION. 

116.  SUBROGATION. 

117.  CONTRIBUTION. 

113.  Explanation. -- There    are    several    kinds   of 
contracts  that  are  properly  classified  as  contracts  of 
guaranty  and  suretyship.     These  contracts  are  those 
in  which  one  party  undertakes  to  be  responsible  for 
the  payment  of  another  party's  debt,  either  abso- 
lutely,  or  if  the  other   party  does  not   pay.      This 
lesson  deals  with  both  classes. 

114.  How  the   Contract    must   be    Made.  —  The 

fourth  section  of  the  Statute  of  Frauds,  which  was 
studied  in  connection  with  contracts,  contained  the 
following :  "  No  action  shall  be  brought  whereby  to 
charge  any  defendant  upon  any  special  promise  to 
answer  for  the  debt,  default,  or  miscarriage  of  another 
person  unless  the  agreement  upon  which  such  action 
shall  be  brought  or  some  memorandum  or  note 
thereof,  shall  be  in  writing,  and  signed  by  the  party 
to  be  charged  therewith  or  some  person  thereunto 

216 


GUARANTY  AND   SURETYSHIP  217 

lawfully  authorized."  It  was  found  necessary  to 
make  this  requirement  regarding  this  class  of  con- 
tracts, as  it  was  very  easy  for  a  creditor  to  misinter- 
pret a  statement  made  by  a  third  party  regarding  the 
payment  of  his  debtor's  obligation.  A  mere  intro- 
duction of  a  party  who  desired  credit,  might,  under 
certain  circumstances,  be  construed  as  a  guaranty 
that  he  would  pay  his  obligation,  although  it  was  not 
the  intention  of  the  person  giving  the  introduction  to 
assume  any  liability  whatever.  In  such  cases  the 
liability  of  the  alleged  surety  was  very  difficult  to 
determine,  owing  to  the  fact  that  much  time  elapsed 
between  the  time  of  the  disputed  statement  and  the 
time  when  the  case  came  before  the  court  for  adjust- 
ment. To  avoid  this  difficulty,  it  was  required  that 
written  evidence  be  submitted  by  any  person  who 
sought  to  recover  against  one  who  had  become  re- 
sponsible for  the  debt  or  obligation  of  another.  It 
is  not  required  that  the  contract  itself  be  in  writing, 
but  that  there  be  sufficient  written  evidence  clearly 
to  establish  the  fact  that  such  a  contract  was  entered 
into  and  what  the  terms  of  the  contract  were. 

In  this  class  of  contracts  there  are  three  parties 
known  as  the  creditor,  the  principal  debtor,  and  the 
secondary  debtor,  who  is  called  a  surety,  guarantor,  or 
indorser. 

A  clear  distinction  must  be  made  between  a  prom- 
ise made  to  the  principal  debtor  that  his  debt  will 
be  paid,  and  a  promise  made  to  the  creditor  that  he 
will  sustain  no  loss  through  the  failure  of  the  debtor 


21 8  GUARANTY  AND  SURETYSHIP 

to  pay  his  obligation.     It  is  only  the  latter  kind  of 
contracts  that  we  are  concerned  with  in  this  lesson. 

115.  Consideration.  —  It    is    not    necessary    that 
there  be  a  separate  consideration  for  the  promise  of 
the  secondary  debtor,  when  his  promise  is  made  at 
the  same  time  that  the  principal  debtor  makes  his 
promise  to  the  creditor.     Consideration  which  satis- 
fies one  promise  will  be  sufficient  for  the  other  also. 
If,  however,  the  contract  of  the  secondary  party  is 
entered  into  after  the  original  contract  of  the  prin- 
cipal  debtor,    a   separate   consideration   will   be   re- 
quired.    This  may  be  any  benefit  to  the  promisor  or 
any  detriment  to  the  promisee,  as  in  the  case  of  all 
other  contracts. 

116.  Subrogation.  —  By  subrogation  is  meant  the 
right  which  any  surety  or  guarantor  has  upon  full 
payment  of  the  debt  to  succeed  to  all  the  creditor's 
rights  against  the  principal.     A  surety,  immediately 
upon  the  payment  of  the  principal's  obligation,  has 
a  right  to  any  security  for  the  debt  belonging  to  the 
surety  which  may  be  in  the  hands  of  the  creditor,  pro- 
viding he  asserts  his  right  promptly.     For  example, 
A  was  surety  on  a  note  made  by  X  in  favor  of  Y. 
The  note  was  secured  by  ten  shares  of  United  States 
Steel  Company's  stock.     Upon  default  in  payment 
by  X,  A  paid  the  entire  amount.     He  is  entitled  to 
the  benefit  of  the  stock  held  by  Y  as  security. 

Immediately  upon  the  payment  of  the  debt  of  the 
principal,  the  surety  has  a  right  to  begin  an  action 


GUARANTY  219 

against  the  principal  for  the  amount  so  paid,  together 
with  any  expense  that  may  be  incurred.  Such  action 
is  brought  on  the  express  promise  of  the  principal, 
or  on  a  promise  of  the  principal  to  repay,  implied  by 
law  from  the  fact  that  the  surety  has  paid  the  prin- 
cipal's debt. 

117.  Contribution.  —  When  one  of  two  or  more 
sureties  or  guarantors  has  to'  pay  an  obligation,  he 
can  immediately  begin  an  action  against  his  cosure- 
ties for  contribution  of  their  just  share  of  the  total. 


LESSON  LVIII 
GUARANTY 

118.  GUARANTOR. 

119.  KINDS  OF  GUARANTIES. 

120.  NOTICE  OF  DEFAULT. 

118.  Guarantor.  —  A  guarantor  is  one  who  agrees 
to  become  responsible  for  the  debt  or  obligation  of 
another,  and  whose  contract  is  conditioned  upon  the 
failure  of  the  principal  to  perform  in  accordance 
with  the  terms  of  the  contract,  and  upon  receiving 
notice  from  the  creditor  that  such  default  has  been 
made.  In  this  respect  the  contract  of  guaranty  dif- 
fers from  the  contract  of  surety.  The  surety  has 
unconditionally  promised  to  pay  the  debt  of  the 
principal  debtor,  but  in  a  contract  of  guaranty,  the 
guarantor  agrees  to  pay,  if  he  receives  notice  that 


220  GUARANTY 

the  principal  debtor  has  not  done  so.     His  obligation 
is  a  secondary  one. 

119.  Kinds  of  Guaranties. -- There  are  several 
kinds  of  guaranties  that  are  recognized  in  the  common 
law. 

General  Guaranty.  —  In  this  guaranty  the  guaran- 
tor promises  to  pay  any  debts  or  obligations  of  a 
designated  person  that  may  exist  at  the  time  of  en- 
tering into  the  contract  of  guaranty,  or  that  may  be 
subsequently  incurred  by  the  party  named.  Such 
a  guaranty  is  usually  addressed  "  to  whom  it  may 
concern,"  and  it  is  not  necessary  for  one  who  extends 
credit  upon  the  strength  of  this  guaranty  to  notify 
the  guarantors  that  he  has  accepted  the  guaranty. 
It  is  sometimes  provided,  in  the  offer  to  become  re- 
sponsible for  the  debt  of  another,  that  such  respon- 
sibility shall  attach  only  upon  receiving  notice  that 
the  third  party  has  acted  upon  the  offer  to  become 
responsible.  This  form  of  guaranty  is  not  desirable 
and  is  being  used  much  less  than  formerly. 

Special  Guaranty.  —  A  special  guaranty  is  one  that 
is  given,  not  to  the  public,  but  to  a  certain  individual 
or  firm,  and  provides  that  the  guarantor  will  be  re- 
sponsible for  the  debt  or  default  of  a  person  named. 

Continuing  Guaranty.  —  This  is  a  guaranty  by 
a  guarantor  who  does  not  limit  his  contract  of 
guaranty  to  one  transaction  or  one  time,  but  agrees 
to  be  responsible  for  the  debt  of  another  up  to  a 
certain  amount  and  for  a  definite  time.  By  giving 
notice,  the  guarantor  may  bring  his  contract  to  an  end. 


GUARANTY  221 

Limited  Guaranty. — A  limited  guaranty  is  one 
that  is  limited  to  one  transaction  or  one  time,  and 
unless  acted  upon  by  a  creditor  in  accordance  with 
its  terms,  the  guarantor  is  not  liable. 

Guaranties  that  are  of  such  a  nature  as  to  indicate 
that  the  guarantor  did  not  intend  that  notice  should 
be  given  him  of  the  acceptance  of  the  guaranty,  are 
said  to  be  absolute,  and  no  such  notice  of  acceptance 
is  necessary. 

120.  Notice  of  Default.  —  As  has  been  stated 
above,  contracts  of  guaranty  require  that  notice  of 
default  shall  be  given  to  the  guarantor,  unless  the 
guaranty  was  in  such  form  as  to  indicate  clearly  that 
he  did  not  expect  to  be  notified  of  such  default. 

Guaranty  of  Payment.  --  When  the  guarantor 
guarantees  the  payment  of  an  obligation,  he  indicates 
his  intention  to  be  notified,  as  otherwise  he  could 
not  know  that  the  payment  had  not  been  made. 
Immediately  upon  default  in  such  cases,  it  is  neces- 
sary for  the  creditor  to  notify  the  guarantor  that  he 
is  expected  to  make  payment.  Failure  to  notify, 
in  order  to  be  available  to  the  guarantor  as  a  de- 
fense, must  have  caused  loss  to  the  guarantor.  For 
example,  if  the  principal  debtor  was  solvent  at  the 
time  the  obligation  became  due,  but  did  not  pay  the 
debt,  and  the  guarantor  was  not  notified  of  his 
failure  to  pay,  the  guarantor  would  be  released  if  sub- 
sequently he  was  notified  of  the  failure,  and  in  the 
meantime  the  principal  debtor  had  become  insolvent. 

Guaranty  of  Collection.  —  When  a  guarantor  guar- 


222  SURETYSHIP 

antees  the  collection  of  an  obligation,  he  indicates 
that  he  does  not  expect  to  be  notified  of  default  of 
payment  at  the  date  of  maturity.  When  such  a 
guaranty  is  made,  it  is  necessary  for  the  creditor  to 
proceed  against  the  principal  debtor  and  exhaust 
all  legal  means  to  recover  the  amount  due,  before 
he  can  proceed  against  the  guarantor.  The  guaran- 
tor who  has  merely  guaranteed  the  solvency  of  the 
debtor  cannot  be  held  liable  unless  the  original 
debtor  is  proven  insolvent. 


LESSON  LIX 

SURETYSHIP 

121.  SURETYSHIP. 

121.  Suretyship.  —  A  surety  is  one  who  under- 
takes to  become  responsible  for  the  payment  of  the 
debt  of  another  party,  and  whose  obligation  is  not 
conditioned  upon  the  failure  of  the  principal  debtor 
to  pay.  The  surety's  obligation  is  an  absolute  one 
and  the  creditor  need  not  even  proceed  against  the 
principal  debtor,  but  may  look  to  the  surety  at  once 
for  the  payment  of  a  debt  at  the  date  of  maturity. 
He  may  even  neglect  to  take  steps  to  collect  from  the 
principal  debtor,  or  to  notify  the  surety,  without  in 
any  way  interfering  with  his  right  to  proceed  against 
the  surety  at  any  time.  In  some  states  statute  law 
has  modified  the  common  law  in  this  respect,  and 


SURETYSHIP  223 

creditors  are  obliged  to  proceed  against  the  principal 
debtor  and  exhaust  all  legal  means  of  collection  be- 
fore looking  to  the  surety  for  payment.  This  is  not 
true  generally. 

A  common  illustration  of  suretyship  is  seen  in  the 
case  of  a  note  made  in  favor  of  C  and  signed  by  A 
and  B.  Even  though  there  is  nothing  in  the  instru- 
ment to  show  that  A  is  the  principal  debtor  and  B 
merely  a  surety,  parol  evidence  may  be  introduced 
to  show  that  such  was  the  case  in  nearly  every  juris- 
diction. To  fix  the  liability  of  B,  the. surety,  it  is 
not  necessary,  as  has  been  stated  above,  for  C  to 
attempt  to  collect  of  A.  He  may  proceed  against  B 
at  once.  When  one  or  more  of  the  parties  signing 
an  instrument  are  sureties,  the  word  "  surety  " 
should  be  written  after  the  name  of  each,  in  order 
that  their  relation  to  the  instrument  may  clearly 
appear. 

There  are  several  ways  in  which  the  surety  may  be 
released  from  his  obligation,  and  in  this  respect  he 
differs  from  a  joint  maker  in  a  note  like  the  one 
referred  to  above.  If  the  creditor  makes  a  binding 
agreement  with  the  principal  to  extend  for  a  definite 
time  the  payment  of  the  debt,  without  first  securing 
the  consent  of  the  surety,  the  latter  will  be  released 
from  further  obligation  on  his  contract.  This  is  on 
the  ground  that  the  contract  upon  which  he  became 
liable  has  been  modified  and  he  is  no  longer  respon- 
sible for  its  payment.  When  such  an  extension  is 
made,  it  also  may  interfere  with  the  right  which  the 


224  SURETYSHIP 

surety  has  to  protect  himself  by  attaching  property 
of  the  principal  debtor.  However,  it  is  not  neces- 
sary that  the  surety  sustain  a  loss  by  reason  of  the 
extension  in  order  to  release  him  from  his  obligation. 
It  has  been  held  that  where  the  surety  is  secured 
against  loss  by  chattel  mortgage  or  collateral  secur- 
ity, an  extension  of  time  does  not  release  the  surety. 

The  surety  may  be  released  if  the  collateral  se- 
curity, which  has  been  given  to  secure  the  payment 
of  the  debt  by  the  principal  debtor,  is  surrendered 
by  the  creditor  without  the  knowledge  and  consent 
of  the  surety.  This  is  necessary  in  order  that  the 
surety  may  not  be  deprived  of  his  right  of  subroga- 
tion ;  that  is,  that  he  may  have  the  right  to  the 
collateral  security  to  reimburse  him  for  any  payment 
which  he  may  have  to  make  for  the  principal  debtor. 

The  creditor  may  agree  to  release  the  surety  and 
such  an  agreement  will  be  binding  on  him.  Thus,  if 
a  surety  upon  an  obligation  which  has  become  due 
asks  the  creditor  to  accept  payment  at  once  if  he 
wishes  to  hold  him,  the  surety,  liable,  and  the  creditor 
states  that  he  will  look  to  the  principal  debtor  and 
not  to  the  surety,  the  surety  is  released  from  all 
further  responsibility  on  his  contract.  This  con- 
tract to  release  the  surety  may  be  made  either  orally 
or  in  writing. 

A  material  alteration  of  an  instrument  upon  which 
one  has  become  surety,  made  by  a  party  to  the  con- 
tract, will  release  the  surety,  as  its  effect  is  to  change 
the  obligation  upon  which  he  became  liable.  This 


CASES  ON  GUARANTY  AND  SURETYSHIP     225 

is  so,  even  though  the  change  would  not  cause  the 
surety  any  loss  or  be  any  disadvantage  to  him.  If 
the  surety  consents  to  the  change,  or  agrees  to  be- 
come further  responsible  for  the  payment  of  the  debt 
with  knowledge  of  such  change,  his  obligation  will 
continue. 

LESSON   LX 
122.   CASES   ON   GUARANTY  AND   SURETYSHIP. 

(1)  Hoisted  v.  Francis ;  31  Mich.  113.  —  One  Rice 
executed  and  delivered  to  Francis  a  valid  promissory 
note.      Halsted    orally    promised     Rice    to    pay  to 
Francis  the  amount  of  the  note,  in  consideration  of 
the  sale  and  delivery  by  Rice  to  Halsted  of  a  horse 
and  wagon.     When  the  note  fell  due,  it  was  not  paid, 
and  Francis  sued  Halsted  for  the  amount. 

(2)  Moles  v.   Bird,   n  Mass.  436. — Moies  sold  a 
piece  of  land  to  defendant's  brother,  and  agreed  to 
accept  as  part  of  the  purchase  price  a  note  signed  by 
defendant   as   surety.      Defendant   signed  the   note 
without  receiving  any  consideration,  the  note  was 
delivered  to  the  plaintiff,  and  the  land  conveyed  to 
defendant's  brother.      When  the  note  fell  due  and 
was  not  paid,  suit  was  brought  against  the  defendant. 

(3)  Taylor  v.    Tarr,  84  Mo.  420. — Tarr  made  a 
promissory  note   and   executed   a   deed  of  trust   as 
security  for  the  note.     Taylor  signed  the  note   as 
surety.     When   the  note  matured,  it  was   paid   by 


226    CASES  ON  GUARANTY  AND   SURETYSHIP 

Taylor,  and    he  brought  suit  against  Tarr  and  the 
trustee. 

(4)  Paulin  v.  Kaighn,  29  N.  S.  L.  480.  —  Paulin, 
Kaighn,  and  Cooper  became  sureties  on  a  bond  from 
the  Camden  Ferry  Company  to  one  Champion  in 
the  sum  of  $30,000,  all  sureties  being  equally  liable. 
Kaighn  and  Cooper  held  security  for  the  benefit  of 
the  sureties   amounting   to  $12,000.     The    company 
defaulted  on  the  bond  and  it  was  paid  by  Kaighn 
and  Cooper  equally.     They  sold   the  security   and 
partially  reimbursed  themselves,  and   Kaighn   alone 
brought  suit   against  Paulin. 

(5)  Kennebec  Bank  v.  Tuckerman,  5  Me.  130. — On 
October  27,  Adams  gave  his  promissory  note,  with 
defendant    as    surety,   to   the   plaintiff  bank.      The 
note  was  due  on  December  27.    When  it  became  due, 
Tuckerman  requested   the  bank  to  collect  the  note 
from  Adams.     Instead,  the  bank  orally  agreed  with 
Adams,  for  a  good  consideration,  to  extend  the  note, 
and  continued  to  extend  it  for  several  years.      Fi- 
nally the  bank  brought  suit  against  Tuckerman. 

(6)  Douglass  v.   Reynolds,  7    Pet.   (U.  S.)    113.- 
Douglass   wrote    a   letter   to    Reynolds,    reading   as 
follows  : 

My  friend,  Mr.  Chester  Haring,  to  assist  him  in  business,  may 
require  your  aid,  from  time  to  time,  either  by  acceptance  or  in- 
dorsement of  his  paper,  or  advances  in  cash ;  in  order  to  save 
you  from  harm  by  so  doing,  I  do  hereby  bind  myself  to  be  re- 
sponsible to  you,  at  any  time,  for  a  sum  not  exceeding  eight 
thousand  dollars,  should  the  said  Chester  Haring  fail  to  do  so. 


CASES   ON   GUARANTY  AND   SURETYSHIP       227 

Reynolds  wrote  Douglass  and  accepted  the  guar- 
anty. Various  advances  and  indorsements  were 
made  for  Haring  until  he  became  indebted  to  Rey- 
nolds for  $20,000,  but  no  notice  of  these  transactions 
was  ever  given  to  Douglass.  When  Haring  failed  to 
pay  his  indebtedness,  notice  was  given  to  Douglass 
and  suit  commenced  by  Reynolds. 

(7)  Ward  v.  Henry,  5  Conn.  595. — Ward  signed  a 
note   with    Henry    at    Henry's    request    and    Henry 
agreed    absolutely  to   hold   Ward   harmless    and   to 
indemnify  him   against   loss.     Ward   paid  the   note 
and  brought  suit  against  Henry  without  giving  him 
any  notice  of  the  payment. 

(8)  Day  v.  Elmore,  4  Wis.  190.  —  Bassett  gave  his 
promissory  note  to  Day,  and  Elmore  signed  a  guar- 
anty reading  as  follows  :    "  I  guaranty  the  collection 
of  the  within  note  for  value  received."     The  note 
was  not  paid  by  Bassett  at  maturity  and  Day  took 
no  proceedings  to  collect  it  for  over  two  years  there- 
after.    When    he    did    proceed    against   Bassett,  he 
could    recover    nothing,    and    brought    suit    on    the 
guaranty. 

(9)  Brookins  v.  Green,  23  Mich.  48. — Green  owned 
a  patent  and  was   about  to  organize  a  company  to 
manufacture    the    article.      He    agreed    orally   with 
Brookins  that,  if  Brookins  would  subscribe  for  shares 
in  the  company  and  give  his  note  for  the  price,  he 
would  secure  a  purchaser  for  the  shares  and  Brookins 
would   not   be   put   to   any   expense   in   the   matter. 
Green  failed  to  carry  out  his  agreement  and  Brookins 


228     CASES  ON  GUARANTY  AND  SURETYSHIP 

was  forced  to  pay  the  note.  He  then  sued  Green 
for  the  amount  so  paid  and  Green  defended  on  the 
ground  that  his  promise  was  void,  being  an  oral 
promise  to  answer  for  the  debt,  default,  or  miscar- 
riage of  another. 

(10)  Rogers  v.  Glenn,  3  Md.  312.  —  Glenn  bought  a 
horse  from  Barber,  who  warranted  its  soundness, 
which  warranty  was  guaranteed  orally  by  Rogers. 
The  price  of  the  horse  was  paid  by  Rogers  upon  the 
written  request  of  Glenn.  Glenn  refused  to  pay 
Rogers  the  money  so  advanced,  on  the  ground  that 
the  horse  was  unsound,  that  Rogers  had  made  him- 
self responsible  for  the  warranty,  and  that  Glenn  had 
a  claim  against  Rogers  on  the  warranty  equal  to  the 
claim  Rogers  had  against  Glenn  for  money  loaned. 
Rogers  then  brought  suit  for  the  money. 


LESSON  LXI 

(1)  Paton   v.    Stewart,  78    111.    481.  —  Bankruptcy 
proceedings  were  pending  against  one  Gardner.     A 
note  was  given  to  Paton  by  Gardner,  guaranteed  in 
writing  by  Stewart,  upon  the  consideration  that  the 
bankruptcy    proceedings    be    dismissed.     The    pro- 
ceedings were  not  dismissed,  but  Paton  brought  suit 
against  Stewart  on  his  guaranty  of  the  note. 

(2)  Milwaukee    Harvester    Co.  v.  Windels,  39  111. 
App.  521. — Windels  was  plaintiff's  agent  for  the  sale 
of  its  machinery,  and  part  of  his  contract  of  agency 


CASES  ON  GUARANTY  AND  SURETYSHIP     229 

was  that  he  should  guarantee  notes  given  by  pur- 
chasers of  machinery.  Long  after  making  his  con- 
tract of  agency,  he  guaranteed  a  note  and  was  sued 
on  his  guaranty  when  the  note  was  not  paid  by  the 
maker.  He  defended  on  the  ground  that  there  was 
no  consideration  for  his  guaranty,  being  one  made 
after  his  contract  of  agency. 

(3)  Tatum   v.    Tatum,    36   N.    C.    113.— Herbert 
Tatum  was  guardian  to  certain  wards   and  Henry 
Tatum  was  surety  on  his  bond.     Herbert  conveyed 
certain    slaves,    without     consideration,    to    Dudley 
Tatum  while  he  was  heavily  indebted  to  his  wards. 
The  wards  obtained  judgment   against  Herbert  on 
his  bond,  and  Henry,  as  surety,  was  compelled  to  pay 
it.     He  then  brought  suit  against  Dudley.     Has  he 
any  right  of  action  ? 

(4)  Morgan  v.  Smith,  70  N.  Y.  537.  —  Defendant 
and  his  brother  Andrew  were  cosureties  on  a  lease. 
The  lessees  became  indebted  to  plaintiff  in  the  sum 
of  $3000.     Andrew  was  released  from  his  obligation 
as    surety,    and   the   plaintiff  brought   suit    against 
defendant  alone  for  the  full  amount  of  the  indebted- 
ness.    Can  the  plaintiff  recover  any  judgment  and, 
if  so,  how  much  ? 

(5)  Seaver  v.  Young,  16  Vt.  658. — Alanson  Seaver 
gave  a  bond  to  James  Seaver,  the  plaintiff,  to  support 
his  mother  during  her  life  and  to  save  James  harm- 
less from  any  expense  for  her  support.     Young  was 
surety  on  the  bond.     Alanson  did  not  support  his 
mother  and  James  incurred  expense  in  so  doing.     To 


230     CASES   ON   GUARANTY  AND   SURETYSHIP 

recover  the  money  so  spent  he  sued  Young,  as  surety 
on  Alanson's  bond,  who  defended  on  the  ground  that 
James  had  not  been  compelled  by  law  to  expend  the 
money  and  that  therefore  the  surety  on  the  bond 
was  not  liable. 

(6)  Wood  v.   Bar  stow,  27  Mass.  368.  —  Defendant 
was  surety  on  the  bond  of  an  executor.     A  legatee 
under  the  will  made  demand  on  the  executor  for  the 
payment  of  her  legacy,  but  he  said  he  was  unable  to 
pay  it.     Suit  was  then  begun  against  defendant,  as 
surety,  who  defended  on  the  ground  that  no  demand 
had  been  made  on  him. 

(7)  Darwin  v.   Rippey,  63  N.  C.  318.     One  Shu- 
ford  made  a  bond,  with   Rippie  as  surety,  to  pay 
Darwin   $125.     The   bond   produced   in   court   read 
"  one  hundred  and  twenty-five  dollars  in  specie,"  and 
it  was  shown  that  the  words  "  in  specie  "  had  been 
added  after  the  execution  of  the  bond  and  without 
Rippie's  knowledge  or  consent.     Has  Rippie  any  de- 
fense to  the  action  against  him  as  surety  ? 

(8)  Baker  v.  Briggs,  25  Mass.   121.  —  Ryan  made 
a  note  to  Baker  on  which  Briggs  was  surety.     After 
the  making  of  the  note,  Baker  told  Briggs  that  Ryan 
had  paid  the  note  and  that  he,  Briggs,  was  free  from 
it.     There  was  no  consideration  for  this  statement, 
and  it  was  not  true  that  the  note  was  paid,  but  Briggs 
relied  on  it  and  failed  to  avail  himself  of  security 
against    Ryan    as    he   otherwise    might    have   done. 
When  the  note  was  not  paid,  Baker  sued   Briggs. 
Has  Briggs  any  defense  ? 


CASES  ON   GUARANTY  AND   SURETYSHIP     231 

(9)  Port   v.    Robbins,  35    la.    208.  —One    Benson 
made  a  note  to  Ashton  and  gave  a  mortgage  on  a 
stock  of  goods   as  security  for  the  note.     Robbins 
was    surety   on    the    note.     Ashton    discharged    the 
mortgage  to  Benson  without  Robbins's  knowledge  or 
consent,  and  thereafter  indorsed  the  note  to  Port, 
who  brought  suit  thereon  against  Benson  as  prin- 
cipal debtor  and  Robbins  as  surety.      Has  Robbins 
any  defense  to  the  action  ? 

(10)  Rapelye  v.  Bailey,  3  Conn.  438.  —  Roger  Bai- 
ley, the  defendant,  wrote  to  plaintiff  as  follows  : 

My  brother,  Roswell,  is  wishing  to  go  into  business  in  New 
York,  by  retailing  goods  in  a  small  way.  Should  you  be  dis- 
posed to  furnish  him  with  such  goods  as  he  may  call  for,  from 
300  to  500  dollars'  worth,  I  will  hold  myself  accountable  for  the 
payment,  should  he  not  pay,  as  you  and  he  shall  agree. 

Roswell  became  indebted  to  plaintiff,  but  Roger 
heard  nothing  about  the  transactions  until  this  suit 
was  begun  on  his  guaranty.  Has  Roger  any  defense  ? 
(n)  Bank  v.  Klingensmith,  j  Watts  (Pa.),  523.— 
One  Story  made  a  note,  on  which  the  defendant  was 
surety,  payable  to  the  plaintiff  bank.  The  note  was 
not  paid  and  the  bank  took  judgment  against  both 
Story  and  the  defendant.  Story  being  about  to 
leave  the  state  with  his  property,  Klingensmith 
went  to  the  cashier  of  the  bank  and  asked  him  to 
issue  execution  on  the  judgment  at  once.  The 
cashier  refused,  saying  that  Story  was  good  for  the 
note  and  that  the  bank  would  release  Klingensmith 
from  his  liability.  Story  did  not  pay  the  note,  and 


232     CASES  ON  GUARANTY  AND  SURETYSHIP 

the  bank  sued  Klingensmith,  as  surety.  He  de- 
fended on  the  ground  that  he  had  been  released,  and 
the  bank  replied  that  there  was  no  consideration  for 
its  promise. 

(12)  Sibley  v.  Stull,  15  N.  J  .L.  332.  —  Hood  made 
his  bond  to  Stull  in  the  sum  of  $1100  for  a  good  con- 
sideration. Stull  assigned  the  bond  to  Sibley  and 
for  consideration  guaranteed  the  payment  of  all 
sums  to  become  due  on  the  bond,  when  they  be- 
came due,  and  for  the  payment  thereof  by  the  maker 
of  the  bond.  Hood  did  not  pay,  and  Sibley  sued 
Stull  on  his  guaranty  without  giving  him  any  notice 
of  non-payment,  or  demanding  payment  from  Hood. 
Can  Sibley  recover  judgment  ? 


LESSON  LXII 
CONTRACTS  OF  AGENCY 

123.  DEFINITION. 

124.  How  FORMED. 

125.  KINDS  OF  AGENTS. 

126.  OBLIGATIONS  OF  PARTIES. 

123.  Definition.  —  Agency  is   a   relation    between 
two  persons  in  which  one,  called  the  agent,  acts  for 
the  other,  called  the  principal. 

Any  person  competent  to  make  contracts  may  be  a 
principal,  and  any  person  competent  to  transact  the 
business  which  the  principal  engaged  him  to  transact 
may  be  an  agent.  The  principal  is  the  sole  judge  as 
to  the  agent's  ability  to  do  his  work. 

124.  How    Formed.  —  An     agency    is    generally 
created   by  contract.      This   contract  may  be  made 
orally,  except  when  the  relation  is  to  continue  for  a 
period  longer  than  one  year  from  the  date  of  making 
the    contract,  when,   according    to    the    Statute    of 
Frauds,  it  must  be  in  writing,  and  where  the  duties 
to  be  performed  by  the  agent  include  the  execution 
of  sealed  instruments  that  are  required  to  be  recorded. 
Where  the  period  of  service  is  to  continue  for  some 

233 


234  CONTRACTS  OF  AGENCY 

time,  it  is  much  better  to  enter  into  a  written  con- 
tract in  which  the  terms  may  be  clearly  stated. 
Where  the  agent  is  to  execute  documents  which  by 
law  are  required  to  be  recorded,  the  authority  under 
which  the  agent  acts  must  be  evidenced  by  a  written 
instrument  called  a  power  of  attorney,  sealed,  signed, 
and  acknowledged  with  the  same  formality  required 
for  the  document  which  is  to  be  executed  by  the 
agent,  in  order  that  the  power  of  attorney  may  be 
recorded  with  it. 

An  agency  may  be  created  by  ratification^^  Where 
an  agent  has  exceeded  his  authority,  or  where  one 
person  acts  for  another  without  any  authority,  the 
principal,  or  the  one  for  whom  such  person  assumes 
to  act,  may  ratify  such  action  either  by  express  words 
or  by  accepting  the  benefits  thereof.  When  an  un- 
authorized act  is  ratified  by  the  principal,  the  effect 
is  to  give  it  the  same  validity  as  if  the  authorization 
had  preceded  the  act,  except  where  the  rights  of 
other  innocent  parties  intervene.  The  ratification, 
to  be  valid,  must  be  made  with  full  knowledge  of  all 
the  essential  facts  connected  with  the  transaction, 
and  must  be  of  the  entire  transaction.  If  induced 
by  fraud,  mistake,  or  concealment,  it  is  not  valid. 

An  agency  may  be  created  by  estoppel.  By  estop- 
pel is  meant  the  legal  inability  to  deny  an  apparent 
fact  because  of  conduct  or  failure  to  act  tending  to 
confirm  the  fact.  An  agency  by  estoppel  is  created 
when  a  party  allows  another  to  represent  himself  as 
his  agent  without  attempting  to  show  that  no  such 


CONTRACTS   OF   AGENCY  235 

agency  exists.  For  example,  if  A  represents  to  C 
that  he  is  B's  agent,  and  B  knowing  of  the  repre- 
sentation allows  C  to  rely  on  it,  an  agency  by  estop- 
pel is  created,  and  when  C  has  acted  in  reliance  upon 
the  supposed  agency  B  is  estopped  from  denying 
that  the  agency  existed. 

An  agency  may  be  created  by  necessity.  This 
occurs  when  the  relation  between  two  persons  is 
such  that  one  of  them  is  given  by  law  authority  to 
bind  the  other  in  certain  contracts.  For  example,  a 
wife  is  the  agent,  by  necessity,  of  her  husband  in  all 
matters  pertaining  to  supplies  for  the  house,  or  suit- 
able articles  for  herself  or  other  members  of  the 
family.  The  captain  of  a  vessel  is  the  agent,  by 
necessity,  of  the  owner  for  the  purchase  of  necessary 
materials  or  the  making  of  necessary  repairs  to  enable 
him  to  complete  a  voyage,  when  it  would  be  difficult 
to  communicate  with  the  owner. 

125.  Kinds  of  Agents.  —  An  agent  who  has  full 
authority  to  bind  his  principal  in  all  matters  pertain- 
ing to  the  principal's  business  is  called  a  general  agent, 
while  an  agent  who  has  authority  to  do  only  special 
acts  is  called  a  special  agent.  It  is  very  important 
that  third  parties  who  deal  with  agents  know  whether 
they  are  special  or  general  agents.  A  general  agent 
will  bind  his  principal  so  long  as  he  acts  within  the 
scope  of  his  apparent,  authority,  even,  though  he 
may  act  in  direct  opposition  to  the  definite  instruc- 
tions of  his  principal,  providing  such  instructions  are 
not  known  to  the  third  party.  The  special  agent 


236  CONTRACTS  OF  AGENCY 

will  bind  his  principal  only  when  he  keeps  within  the 
scope  of  his  ^^authority.  In  dealing  with  a  special 
agent,  one  should  insist  upon  knowing  just  what 
authority  has  been  given  him  by  his  principal.  In 
very  important  matters  the  agent  should  show  a 
power  of  attorney  from  his  principal,  showing  with 
what  authority  he  had  been  clothed. 

126.  Obligations  of  Parties.  —  The  principal  is 
obligated  to  pay  the  agent  for  his  service  unless  it  is 
apparent  that  the  agent  performed  the  service 
gratuitously.  The  agent  may  recover  for  his  serv- 
ices the  contract  price,  when  one  has  been  agreed 
upon,  and  a  reasonable  amount,  when  no  definite 
sum  has  been  named. 

The  principal  must  make  good  to  the  agent  any  loss 
which  may  result  as  a  consequence  of  any  act  per- 
formed within  the  agent's  authority,  if  that  act  was 
lawful,  and  even  if  unlawful,  if  the  agent  did  not 
know  that  it  was  unlawful.  For  example,  an  auc- 
tioneer who  sells  stolen  goods,  without  knowing  that 
they  were  stolen,  may  hold  his  principal  liable  for 
any  resulting  loss  that  he  may  sustain. 

Immoral  acts,  or  acts  against  the  public  welfare, 
cannot  be  authorized,  and  one  who  performs  such 
acts  for  another  is  alone  responsible. 

The  principal  is  also  obligated  to  pay  the  necessary 
expenses  incurred  by  the  agent  for  the  principal's 
benefit. 

Liability  of  Principal.  -  -  The  principal  as  well  as 
the  agent  will  be  liable  for  fraud,  negligence,  or  any 


CONTRACTS  OF  AGENCY  237 

other  tort  committed  by  his  agent  while  acting  within 
the  scope  of  his  authority.  The  principal  will  also 
be  liable  for  malicious  acts  of  the  agent  who,  at  the 
time  of  committing  such  acts,  is  performing  the  duties 
intrusted  to  him  by  the  principal.  If  the  malicious 
acts  of  the  agent  are  committed  by  the  agent  while 
temporarily  acting  outside  of  the  scope  of  his  author- 
ity, the  principal  will  not  be  liable.  The  motorman, 
who,  while  running  his  car,  maliciously  injures  a 
driver  of  a  coal  wagon,  renders  his  principal  liable  for 
the  damage,  but  the  motorman  who  stops  his  car 
and  leaves  it  to  inflict  an  injury  upon  a  driver  of  a 
coal  wagon  is  alone  responsible  for  his  act.  In  all 
cases  of  malicious  wrong  the  agent  is  liable,  and  in 
cases  where  the  principal  is  liable,  as  stated  above, 
the  injured  party  may  proceed  against  either. 

It  is  the  duty  of  the  agent  to  obey  all  instructions 
of  the  principal  in  so  far  as  they  do  not  require  him 
to  perform  any  wrongful  act.  The  agent  must  ex- 
ercise judgment  and  skill  wherever  these  attributes 
are  required,  and  in  undertaking  to  perform  service 
for  a  principal,  the  agent  impliedly  warrants  that 
he  has  the  necessary  judgment  and  skill.  The  agent 
must  also  act  in  good  faith  and  the  secrets  of  his 
principal's  business  must  be  kept  to  himself.  He 
can  make  no  personal  profit  at  the  expense  of  his 
principal.  In  all  transactions  within  the  scope  of 
the  business  for  which  the  agency  was  created  the 
principal's  interests  must  be  placed  above  those  of  the 
agent. 


238  CONTRACTS  OF  AGENCY 

LESSON   LXIII 
CONTRACTS  OF   AGENCY  —  CONTINUED 

127.  SUBAGENTS. 

128.  TERMINATION  OF  AGENCY. 

127.  Subagents.  —  An   agent  is  expected  to  per- 
form personally  the  work  intrusted   to  him  by  the 
principal,  if  the  work  is  of  such  a  nature  that  the 
principal  can  reasonably  be  supposed  to  have  engaged 
him  because  of  his  special  skill  or  ability.     When 
the  service  to  be  performed  is  merely  ministerial  or 
routine  duty,  the  agent  may  employ  a  subagent  to 
act  for  him.     In  such  cases  the  subagent  is  liable  to 
the  agent  for  his  conduct,  and  the  agent  to  his  prin- 
cipal.    In  some  cases  it  is  apparent  from  the  nature 
of  the  work  to  be  performed  that  the  principal  in- 
tended the  agent  to  employ  others  to  assist  him.     In 
such  cases  the  agent  is  not  liable  to  the  principal  for 
the  acts  of  his  associates,  as  they  are  agents  of  the 
principal  employed  under  the  implied  authority  con- 
ferred upon  the  first  agent  by  the  principal.     It  is 
sometimes   expressly   agreed   between   the   principal 
and   agent   that   assistants   shall   be   employed.     In 
such    cases    the    assistants    become    the    agents    of 
the  principal. 

128.  Termination.  —  An    agency    may  be   termi- 
nated : 

(a)    By  limitation  when  the  time   for  which   the 


CONTRACTS   OF   AGENCY  239 

agency   was   formed    has   expired,   or   the   work   for 
which  the  agent  was  employed  has  been  completed. 

(b)  By  mutual  agreement  when  the  agent  and  prin- 
cipal enter  into  a  contract  with  each  other  to  ter- 
minate the  relation  before  the  time  agreed  upon  has 
expired. 

(c)  By  revocation  of  the  agent's  authority  by  the 
principal  or  by  the  agent's  renouncing  the  agency. 
Either  the  principal  or  agent  has  the  power  to  ter- 
minate the  agency  at  any  time,  as  the  law  will  not 
compel  two  men  to  associate  in  this  relation.     If, 
however,  either  terminates  the  relation  contrary  to 
the  contract  between  them,  without  the  consent  of 
the  other,  the  one  so  terminating  will  be  liable  for 
damages    resulting    from    the    breach    of    contract. 
When   the   principal   revokes   the   authority  of  the 
agent,  he  must  notify  third  parties  who  are  likely  to 
deal  with  the  agent,  and  should  give  notice  to  the 
public   of   such   revocation.      Otherwise   he   will   be 
bound  by  any  acts  of  the  agent  which  would  have 
been    within    the    scope    of   his    authority    had    the 
agency  continued. 

(d)  By  death,  insanity,  or  bankruptcy  of  either  the 
principal  or  agent.     The  acts  of  the  agent  are  the 
acts  of  the  principal,  and  at  the  death  of  the  principal 
he  ceases  to  have  capacity  to  contract.     When  the 
principal  has  been  declared  insane  and  has  no  further 
power  to  contract,  his  agent  cannot  bind  him  by  any 
act.     In  the  case  of  bankruptcy  of  either  principal 
or  agent,  it  becomes  necessary  to  turn  the  property 


240  CASES  ON  AGENCY 

of  the  bankrupt  over  to  his  trustee,  and  therefore 
no  contracts  with  reference  to  this  property  can  be 
made  by  the  principal  or  agent. 

(e)  By  declaration  of  war  between  the  countries  of 
the  principal  and  agent  where  they  are  citizens  of 
different  countries.  This  becomes  necessary  because 
of  the  law  that  contracts  may  not  be  made  between 
citizens  of  two  countries  that  are  at  war  with  each 
other. 

There  is  one  kind  of  agency  in  which  the  principal 
cannot  revoke  the  agent's  authority.  This  is  an 
agency  coupled  with  an  interest.  In  such  an  agency 
the  agent  has  an  interest  in  the  subject  matter  of  the 
agency.  For  example,  A  owes  B  fifty  dollars.  A 
gives  his  horse  to  B  with  instructions  to  sell  him  for 
one  hundred  dollars  and  to  keep  his  commission  and 
the  fifty  dollars  which  A  owes  B,  returning  the 
balance.  Such  an  agency  is  not  revoked  by  the 
death,  insanity,  or  bankruptcy  of  the  principal,  nor 
can  it  be  revoked  by  the  principal  without  the 
agent's  consent. 


LESSON   LXIV 
129.    CASES  ON  AGENCY. 

(i)  Rahn  v.  The  Singer  Manufacturing  Co.,  132 
U.  S.  518. — Corbett  was  employed  by  the  Singer 
Manufacturing  Co.  to  sell  sewing  machines  on 
"  Canvasser's  Salary  and  Commission  Contract." 


CASES  ON  AGENCY  241 

It  was  agreed  between  Corbett  and  the  company  that 
he  should  devote  his  entire  time  to  the  sale  of  sewing 
machines ;  the  company  was  to  furnish  him  with  a 
wagon  ;  the  horse  and  harness  were  to  be  furnished  by 
Corbett  and  were  to  be  used  exclusively  in  canvassing 
for  the  sale  of  Singer  machines.  While  driving  care- 
lessly, Corbett  ran  into  Rahn,  inflicting  serious  in- 
jury. This  action  was  brought  by  Rahn  against  the 
Singer  Manufacturing  Co.  to  recover  damages. 

(2)  Rice  v.  Woody  113  Mass.  133.  —  Rice  was  em- 
ployed by  a  third  party,  on  commission,  to  dispose 
of  certain  real  estate  and  later,  without  the  knowledge 
of  that  third^  person,  he  entered  into  a  contract  with 
Wood  under  which  he  was  to  exchange  certain  stocks 
for  real  estate  and  was  promised  a  commission  for  his 
services.     Wood  knew  that  Rice  was  employed  by 
the  owner  of  the  real  estate  to  sell  it,  and  with  knowl- 
edge of  this  fact,  he  was  introduced  by  Rice  to  the 
owner  of  the  real  estate  and  the  exchange  was  effected. 
This  action  was  brought  by  Rice  to  secure  the  com- 
mission which  Wood  had  promised  to  give  him. 

(3)  McArthurv.  Times  Printing  Co.,  48  Minn.  319.— 
In  September,  1889,  C.  A.  Nimrocks  and  others  were 
engaged   in   organizing  the  Times   Printing  Co.   to 
publish    a    newspaper.      During  that  month,  Nim- 
rocks made  a  contract  with  McArthur  in  behalf  of  the 
contemplated  company  in  which  it  was  agreed  that 
McArthur  should  act  as  advertising  solicitor  for  a 
period  of  one  year  from  October  1st.     The  corpora- 
tion was  not  fully  organized  until  October  i6th,  but 


242  CASES  ON  AGENCY 

the  publication  of  the  paper  was  begun  October  1st, 
at  which  date  McArthur  entered  upon  the  duties  of 
advertising  solicitor  in  accordance  with  his  agree- 
ment. He  continued  in  this  position  until  the  follow- 
ing April,  when  he  was  discharged.  All  of  the  officers, 
stockholders,  and  directors  of  the  company  knew  of 
the  contract  between  Nimrocks  and  McArthur  at 
the  time  the  company  was  organized.  No  objection 
was  ever  made  to  it.  This  action  was  brought  by 
McArthur  to  recover  damages  for  breach  of  contract. 

(4)  Exchange    National   Bank   v.    Third   National 
Bank,  112  U.  S.  276. — The  Exchange  National  Bank 
of   Pittsburgh    had  in  its   possession   certain  drafts 
drawn  on  Walter  M.  Conger,  Se.c., -Newark  Tea  Tray 
Co.,  Newark,  N.  J.     These  drafts  were  sent  to  the 
Third  National  Bank  of  New  York  for  collection. 
The  Third  National  Bank  of  New  York  sent  them  to 
a  bank  in  Newark.     It  was  understood  by  all  of  the 
banks  that  the  drafts  were  drawn  on  the  Tea  Tray 
Company  and  not  on  Walter  M.  Conger  personally. 
The  Newark  bank  took  Conger's  individual  accept- 
ance but  gave  no  notice  of  this  fact  until  the  drawers 
and  indorsers  of  the  drafts  had  become  insolvent. 
This  action  was  brought  to  hold  the  Third  National 
Bank  of  New  York  responsible  for  the  negligence  of 
the  Newark  bank  to  which  the  drafts  were  sent  for 
collection. 

(5)  Blackstone  v.  Buttermore,  53   Penn.  St.  266.— 
Buttermore  was  the  owner  of  certain  land,  and  he 
gave   Davidson   a   power   of  attorney.     He   further 


CASES   ON  AGENCY  243 

stated  in  the  same  instrument  that  "  this  authority 
is  irrevocable  before  the  first  day  of  May  next."  On 
the  iQth  of  April,  Davidson  entered  into  an  agreement 
for  the  sale  of  the  land  to  Blackstone.  Buttermore 
refused  to  carry  out  the  sale,  as  he  had  previously  re- 
voked the  power  of  attorney  given  to  Davidson,  and 
Blackstone  had  received  notice  of  this  revocation. 
This  action  was  brought  to  enforce  the  contract. 

(6)  Claflin  v.  Lenheim,  66  N.  Y.  301. — Lenheim 
was  the  owner  of  a  store  in  Meadville,  Pa.  For 
several  years  prior  to  July,  1867,  Claflin  had  sold 
goods  to  Lenheim  through  his  brother,  H.  S.  Len- 
heim, who  had  charge  of  the  store  at  Meadville.  In 
August,  1867,  a  bill  of  goods  amounting  to  $8000 
was  purchased  for  the  Meadville  store  and  there  was 
some  dispute  between  Claflin  and  Lenheim  regarding 
it.  The  difference  between  the  parties  was  settled 
in  a  court  of  law.  About  this  time,  the  store  at 
Meadville  was  destroyed  by  fire.  Lenheim  con- 
ducted a  second  store  at  Great  Bend,  Pa.  After 
the  trouble  referred  to  between  Claflin  and  Len- 
heim in  1867,  no  further  purchases  were  made  for 
either  the  Great  Bend  store  or  the  Meadville  store 
until  October,  1869,  when  Lenheim  ordered  goods  of 
Claflin  for  the  Great  Bend  store.  A  month  or  two 
later,  H.  S.  Lenheim  purchased  goods  in  the  name  of 
his  brother  for  the  Meadville  store.  Lenheim,  the 
defendant,  claimed  that  his  brother  was  not  author- 
ized to  make  the  purchase  and  refused  to  pay  for  the 
goods  on  the  ground  that  his  brother  had  no  author- 


244  CASES  ON  AGENCY 

ity  to  purchase  the  goods  in  his  name.  Evidence 
was  given  tending  to  prove  that  no  formal  notice  had 
been  given  by  defendant  Lenheim  to  Claflin  that  his 
brother  was  no  longer  his  representative. 
t  (7)  Me  Kindly  v.  Dunham,  55  Wis.  515.  —  In 
August,  1879,  W.  L.  Kilbourn  called  upon  Dunham 
and  exhibited  business  cards  of  McKindly's  company 
in  Chicago.  He  obtained  an  order  from  Dunham  for 
1000  cigars  of  a  certain  brand  made  by  McKindly. 
The  order  was  sent  to  McKindly  who  shipped  the 
goods  to  Dunham  with  the  bill  of  $30  payable  in 
60  days.  About  30  days  afterward,  Kilbourn  called 
upon  Dunham  and  asked  him  for  payment  of  the  bill. 
Dunham  paid  the  bill  and  took  a  receipt  from  Kil- 
bourn. This  money  never  reached  McKindly.  This 
action  was  brought  to  recover  the  amount  from  Dun- 
ham. The  evidence  showed  that  Kilbourn  was  to 
solicit  orders  from  country  merchants,  and  if  such 
orders  as  he  might  secure  were  accepted  and  filled  by 
McKindly,  he,  Kilbourn,  should  receive  a  commission 
on  them. 

(8)  Liebscher  v.  Kraus,  74  Wis.  387. — This  action 
was  brought  against  Kraus  as  a  joint  maker  of  the 
following  note  : 

$637.40.  MILWAUKEE,  January  i,  1887. 

Ninety  days  after  date,  we  promise  to  pay  to  Leo  Liebscher, 
or  order,  the  sum  of  six  hundred  and  thirty-seven  dollars  and 
forty  cents,  value  received. 

San  Pedro  Mining  and  Milling  Company, 
F.  KRAUS,  President.    . 


CASES  ON  AGENCY  245 

(9)  Davis  v.  Hamlin,  108  111.  39.  —  Davis  was  the 
confidential  agent  of  Hamlin,  who  was  the  lessee  of 
a  theater.  Just  before  the  expiration  of  Hamlin's 
lease,  Davis  secretly  leased  the  premises  from  the 
owner  for  a  new  term,  taking  the  lease  in  his  own 
name.  Hamlin  brought  an  action  against  Davis  to 
compel  him  to  turn  over  the  lease  to  him  on  the 
ground  that  it  was  procured  while  he  was  acting  as 
his  confidential  secretary  and  presumably  for  his 
benefit. 

^  (10)  Whitney  v.  Merchants1  Union  Express  Co., 
104  Mass.  1 52.  — A  certain  draft  drawn  upon  Plumber 
&  Co.  was  given  by  Whitney  to  the  express  company 
with  definite  instructions  to  present  it  to  Plumber  & 
Co.,  and  if  they  refused  to  honor  it,  to  return  it 
immediately.  The  express  company  presented  it  to 
Plumber  &  Co.,  but  some  question  was  raised  re- 
garding the  amount  and  they  withheld  it  until  they 
could  write  to  Whitney  and  ascertain  the  correct 
amount.  After  some  correspondence  regarding  the 
matter,  the  amount  was  determined  to  the  satisfac- 
tion of  Plumber  &  Co.  and  they  were  ready  to  pay  it 
on  the  morning  of  the  i6th,  but  the  express  company 
did  not  present  it,  and  on  the  I9th  Plumber  &  Co. 
became  bankrupt.  This  action  was  brought  to  re- 
cover the  amount  from  the  express  company. 


246  CASES   ON   AGENCY 

LESSON  LXV 

*(i)  Eberts  v.  Selover,  44  Mich.  519. — A  subscrip- 
tion agent  canvassing  for  a  history  to  cost  $10  had 
a  book  for  signatures,  and  on  this  book  it  was  printed 
that  no  terms  except  those  printed  thereon  should  be 
binding.  A  justice  of  the  peace  consented  to  sign, 
on  condition  that  his  office  fees  from  that  time  to  the 
time  of  delivery  of  the  book  should  be  taken  in  pay- 
ment. This  was  agreed  to,  and  he  was  given  a 
written  memorandum  by  the  agent  to  that  effect. 
What  are  the  rights  of  the  publisher  and  the  pur- 
chaser ? 

(2)  McCready  v.  Thorn,  51  N.  Y.  454.  —  An  action 
was  brought  against  the  owners  to  recover  for  serv- 
ices and  advances  rendered  to  the  master  of  a  ship. 
The  master  was  running  the  vessel  under  an  arrange- 
ment with  the  owners  whereby  the  master  was  to 
furnish  everything  and  divide  the  profits,  but  the 
plaintiff  had  no  notice  of  this.     Were  the  owners  of 
the  vessel  liable  for  the  money  and  labor  advanced 
to  the  master  ? 

(3)  Wallace  v.  Floyd,  29  Pa.   St.  184. —Here  the 
plaintiff  agreed  to  work  for  a  given  time  at  a  certain 
salary.     He  stayed  beyond  the  time,   and  nothing 
was  said  about  the  salary  for  the  additional  period. 
Could   he  recover    salary  for  the   period  which   he 
worked  beyond  the  time  stated  in  the  original  con- 
tract, and  if  so,  at  what  rate  ? 

(4)  Moore    v.    Appleton,  26  Ala.    633.  —  Plaintiff 


CASES  ON  AGENCY  247 

brought  an  action  to  be  reimbursed  for  damages 
which  he  had  been  obliged  to  pay,  because  of  certain 
acts  performed  by  him  as  agent  for  the  defendant  in 
dispossessing  a  third  party  of  lands  claimed  by  the 
defendant,  and  which  plaintiff  had  reason  to  believe 
belonged  to  defendant.  Is  the  plaintiff  entitled  to 
recover,  and  if  so,  on  what  ground  ? 

(5)  Walker  v.  Osgood,  98  Mass.  348.  —  This  was  an 
action  by  a  real  estate  agent  for  commissions.     De- 
fendant had  employed  plaintiff  to  sell  or  trade  his 
farm  and  the  agent  effected  an  exchange  and  made 
an  agreement  with  the  third  party  that  he  was  to  re- 
ceive from  him  a  commission.     Should  the  plaintiff 
be    allowed    to    recover    his    commissions    from   the 
defendant  ?     What  would  be  his  rights  against  the 
third  party  ? 

(6)  Bunker  v.  Miles,  30  Me.  43 1 .  —  Defendant  was 
employed  by  plaintiff  to  buy  a  certain  horse  for  him 
for  $80  or  as  much  less  as  he  could,  and  was  to  have  $i 
for   his   trouble.     Defendant   bought   the   horse   for 
$72.50  and  returned  no  part  of  the  $80  to  plaintiff. 
This   action  was  brought  to  recover  the  difference 
between  the  purchase  price  plus  $i  which  was  agreed 
to  be  paid  for  the  services  and  the  $80  advanced  to 
the  defendant. 

(7)  Kerfoot  v.  Hyman,  52  111.  512.  —  Here  plaintiff 
owned  certain  land  and  employed  defendant  to  sell 
it  for  a  certain  amount.     The  defendant  bought  it 
himself  and  took  the  title  in  the  name  of  a  third 
party,  but  for  his  own  benefit  without  the  owner's 


248  CASES  ON  AGENCY 

knowledge,  and  at  the  same  time  had  a  part  of  it  sold 
for  as  much  as  he  obtained  for  the  whole  of  it  for  the 
plaintiff.  This  action  was  brought  by  the  plaintiff 
to  recover  the  profit  on  the  property  sold,  and  to 
have  the  balance  of  the  unsold  property  returned  to 
him. 

(8)  Allen  v.  Merchants  Bank,  22  Wend.  (N.  Y.) 
215. — This  is  a  case  where  a  draft  was  drawn  by 
plaintiff  in  New  York  on  a  Philadelphia  merchant 
and  deposited  by  plaintiff  in  the  Merchants  Bank 
of  New  York.     Defendant  bank  sent  the  draft  to 
the   Philadelphia   bank.     It  was   presented   by  the 
Philadelphia  bank  notary,  but  he  did  not  properly 
protest  it,  and  because  of  the  lack  of  the  proper  pro- 
test plaintiff  was  damaged.     This  action  was  brought 
by  the  depositor  against  the  bank  in  which  the  de- 
posit was  made. 

(9)  Dempsey  v.  Chambers,  154  Mass.  330. — This 
was  an  action  for  -damages  in  breaking  a  plate-glass 
window.     It  was  proved  that  the  party  who  delivered 
coal  for  the  defendants,  and  in  so  doing  broke  the 
window,  was  not  authorized  to  deliver  coal  for  them, 
and  they  did  not  know  of  his  doing  it.     Later,  after 
they  knew  of  the  broken  window,  they  presented  a 
bill  for  the  coal. 

(10)  Moore  v.  Stone,  40  Iowa,  259. — An  agent  was 
employed  by  plaintiff  to  negotiate  for  the  purchase 
of  certain  land.     He  obtained  the  contract  for  the 
conveyance,  the  first  payment  was  made,  and  the 
agent  was  paid  for  his  services.     After  the   agent 


CASES  ON  AGENCY  249 

was  paid  for  his  services,  he  bought  in  the  property 
at  tax  sale,  and  the  plaintiff  in  this  case  brings  this 
action  to  set  aside  the  sale  on  the  ground  that  the 
defendant  was  still  his  agent,  and  therefore  could  not 
purchase  the  property  in  his  own  name. 

(i  i)  Knapp  v.  Alvord,  10  Paige  Ch.  (N.  Y.)  205.  — 
A  cabinetmaker,  on  going  abroad,  employed  an  agent 
to  carry  on  his  business,  and  gave  him  the  full  and 
entire  control  of  his  property,  with  a  written  power 
to  sell  any  or  all  of  the  furniture  or  stock,  and  apply 
the  proceeds  to  the  security  or  payment  of  a  certain 
note  indorsed  by  said  agent  and  a  third  party,  or  for 
any  renewals  upon  which  the  agent  might  become 
liable.  The  cabinetmaker  subsequently  died  before 
his  property  had  been  entirely  disposed  of  by  the 
defendant.  The  plaintiff  contends  that,  at  the  death 
of  the  cabinetmaker,  the  agency  with  the  defendant 
ceased. 


LESSON  LXVI 
CONTRACTS  OF  PARTNERSHIP 

130.  DEFINITION. 

131.  How  FORMED. 

132.  KINDS  OF  PARTNERS. 

130.  Definition.  —  A    partnership    is    the  relation 
between  two  or  more  persons  in  which  they  have 
united  their  capital,  labor,  skill,  or  experience  in  the 
prosecution   of  a   business,    as   principals,   for  their 
mutual  profit.     Persons  may  be  associated  in  busi- 
ness under  a  contract  to  share  losses  and  gains  with- 
out forming  a  partnership,  but  when  it  is  agreed  or 
understood   that   each,   as   principal,   shall   have   an 
equal  voice   in   the  management  of  the  business,  a 
partnership  relation  is  created.     Thus  it  will  be  seen 
that  the  idea  of  principalship  is  important. 

131.  How  Formed.  —  A  partnership  may  be  formed 
by: 

(a)  Oral  contract. 

(b)  Written  contract. 

(c)  Implication. 

A  partnership  which  is  to  be  terminated  within 
one  year  may  be  formed  by  oral  contract.  If  it  is 
to  continue  for  a  longer  period,  the  Statute  of  Frauds 

250 


CONTRACTS  OF   PARTNERSHIP  251 

requires  written  evidence.  It  is  preferable,  however, 
to  enter  into  a  written  contract  in  which  all  of  the 
important  terms  of  the  agreement  are  set  forth. 
This  will  avoid  possible  misunderstanding  and  enable 
the  partners  to  know  at  any  time  just  what  their 
rights  are  as  against  each  other.  No  particular 
form  of  writing  is  necessary.  The  written  agree- 
ment is  called  Articles  of  Copartnership  and  should 
contain  the  following  facts  and  any  others  that  may 
seem  desirable  : 

(a)  Name  of  the  firm. 

(b)  Nature  of  the  business. 

(c)  Location  of  the  business. 

(d)  Names  of  the  partners. 

(e)  Investment  of  each  partner. 
(/)  Duties  of  the  partners. 

(g)   Division  of  profits. 

(h)   Division  of  assets  on  dissolution. 

It  sometimes  happens  that  two  or  more  parties 
enter  upon  a  business  venture  without  going  through 
the  formality  of  entering  into  a  partnership  agree- 
ment. It  is  simply  understood  between  them  that 
they  will  undertake  the  venture  jointly,  share  the 
profits  or  bear  the  losses  equally,  and  each  is  to  have 
a  voice  in  the  management  of  the  business.  In 
such  a  case  a  partnership  is  formed  by  an  implied 
contract,  and  the  partners  are  subject  to  all  the  laws 
applicable  to  partnerships  created  by  means  of  ex- 
press contracts. 


252  CONTRACTS  OF   PARTNERSHIP 

When  two  or  more  parties,  without  any  intention 
to  assume  the  responsibilities  of  partners,  act  as  if 
they  were  partners  and  by  their  acts  cause  third 
persons  to  believe  they  are  partners,  they  will  be' 
considered  partners  as  to  such  third  persons  dealing 
with  them.  This  is  called  a  partnership  by  estoppel. 
By  estoppel  is  meant  the  legal  inability  to  deny  an 
apparent  fact  because  of  conduct,  or  failure  to  act, 
tending  to  confirm  the  fact.  Among  themselves  the 
parties  have  no  rights  as  partners,  but  as  to  third 
persons  dealing  with  them  believing  them  to  be  part- 
ners, they  are  liable  as  such. 

132.  Kinds  of  Partners. -- There  are  six  kinds  of 
partners  according  to  the  most  convenient  classi- 
fication : 

Ostensible  or  Public. 

Secret. 

Silent. 

Nominal. 

Dormant. 

Limited  or  Special. 

An  ostensible  or  public  partner  is  one  who  is  in 
reality  a  partner  in  the  business,  is  known  as  such, 
and  who  has  full  liability  as  such. 

A  secret  partner  is  one  who  is  in  reality  a  partner, 
but  who  is  not  known  to  the  public  as  such.  He 
has  a  voice  in  the  affairs  of  the  partnership,  and  is 
in  every  way  like  the  public  partner,  except  that  his 
relation  to  the  business  is  not  known  to  the  public. 


CONTRACTS  OF   PARTNERSHIP  253 

A  silent  partner  is  one  who  is  in  reality  a  partner, 
and  who  is  known  to  the  public  as  such,  but  who  has 
no  active  part  in  the  management  of  the  partnership 
business. 

A  nominal  partner  is  one  who  is  not  in  reality  a 
partner,  but  who  has  allowed  the  firm  to  use  his  name 
in  such  a  way  as  to  indicate  to  third  parties  that  he 
is  financially  interested  in  the  business.  His  liability 
to  third  parties  dealing  with  the  firm  is  the  same  as 
that  of  a  public  partner. 

A  dormant  partner  is  one  who  is  both  secret  and 
silent.  He  is  not  known  to  the  public  and  has  no 
voice  in  the  partnership  affairs,  but  shares  in  the 
profits. 

A  special  or  limited  partner  is  one  who  invests  a 
certain  amount  in  the  business  and  his  liability  to 
third  parties  is  limited  to  this  amount.  Certain 
formalities  must  be  complied  with,  such  as  giving 
notice  to  the  public  that  a  limited  partner  is  con- 
nected with  the  firm,  by  means  of  public  advertise- 
ments, filing  in  a  public  office,  etc.  The  word 
"  limited  "  after  the  partnership  name  is  required  in 
some  jurisdictions.  In  some  states  no  limited  part- 
nerships may  be  formed. 


254  CONTRACTS  OF   PARTNERSHIP 

LESSON  LXVII 
CONTRACTS  OF   PARTNERSHIP  —  CONTINUED 

,  133.  LIABILITY  OF  PARTNERS. 

134.  POWER  OF  MAJORITY. 

135.  COMPENSATION. 

136.  CHOICE  OF  ASSOCIATES. 

137.  DISSOLUTION. 

133.  Liability  of  Partners.  —  Each  partner,  ex- 
cept a  special  partner,  is  individually  liable  for  the 
debts  of  the  firm.  The  partners  have  a  joint  lia- 
bility, but  if  an  action  is  brought  against  all  of  them 
and  judgment  secured,  the  judgment  can  be  satis- 
fied out  of  the  property  of  any  one  of  the  partners. 
In  case  the  partnership  becomes  bankrupt,  the  part- 
nership creditors  must  first  make  claim  on  the  assets 
of  the  firm  and  then  they  may  look  to  the  individual 
property  of  the  partners,  if  any  is  left  after  individual 
creditors  are  paid.  Thus  it  will  be  seen  that  individ- 
ual creditors  have  first  claim  on  individual  property 
of  the  partners.  Firm  creditors  have  first  claim  on 
firm  property.  It  is  held  in  many  states  that,  where 
there  are  no  firm  assets,  firm  creditors  may  share 
equally  with  individual  creditors  in  the  property 
of  the  individual  partners. 

The  liability  of  a  secret  partner  is  the  same  as 
that  of  any  other  partner  if  his  identity  becomes 
known. 


CONTRACTS   OF   PARTNERSHIP  255 

When  the  partnership  is  dissolved,  a  notice  of 
dissolution  must  be  sent  to  all  the  creditors  of  the 
firm,  and  a  notice  must  also  be  published  for  the 
benefit  of  the  public.  If  such  notices  are  given,  the 
retiring  partner  will  not  be  liable  for  any  debts 
entered  into  after  his  retirement,  but  he  will  con- 
tinue to  be  liable  to  third  parties  for  debts  contracted 
while  he  was  a  member  of  the  firm,  even  though  he 
has  entered  into  a  contract  with  his  partners  whereby 
they  assume  full  liability. 

134.  Power  of  Majority.  —  In  all  matters  pertain- 
ing to  the  regular  conduct  of   the  firm's  business, 
the  will  of  the  majority  of  the  partners  will  prevail, 
but  on  certain  matters  such  as  changing  the  location 
or  the  nature  of  the  business,  the  consent  of  all  part- 
ners must  be  secured. 

135.  Compensation.  —  No    partner    can    demand 
compensation  for  his  services  unless  it  is  so  stated  in 
the  contract  by  which  the  partnership  is  formed.     In 
the  absence  of  any  agreement  to  the  contrary,  each 
partner  is  expected  to  give  his  time  to  the  conduct 
of  the  partnership  affairs.     If  one  partner  is  absent 
for  a  long  period  of  time  on  account  of  illness,  the 
other    partner    can    demand    no    compensation    for 
extra  services.     He  may  employ  some  one  to  assist 
him  vvith  the  work  and  charge  the  expense  to  the 
firm. 

136.  Choice    of    Associates.  —  Persons    have    the 
right  to  choose,  not  only  those  with  whom  they  are 


256  CONTRACTS  OF   PARTNERSHIP 

willing  to  form  a  partnership,  but  also  those  who 
may  subsequently  come  into  the  partnership.  The 
heirs  of  a  deceased  partner  cannot  come  into  a  part- 
nership relation  with  the  survivors  without  their 
consent.  The  purchaser  of  a  partner's  interest  has 
only  the  right  to  receive  the  share  which  belonged 
to  the  retiring  partner  upon  the  settlement  of  the 
partnership  affairs. 

137.  Dissolution.  -  -  There  are  seven  important 
causes  of  dissolution  of  a  partnership.  A  partner- 
ship is  dissolved  : 

(a)  By  limitation,  when  the  time  for  which  it  was 
organized  has  elapsed,  or  the  purpose  for  which  the 
partnership  was  formed  has  been  accomplished. 

(b)  By   sale   of  a   partner's    interest.     When    this 
occurs,  the  person  who  buys  the  retiring  partner's 
interest  has  no  right  to  come  into  a  partnership  as  a 
partner,  but  can  demand  a  settlement  of  the  part- 
nership affairs  and  the  payment  to  him  of  the  share 
that  belongs  to  the  retiring  partner  whose  interest  he 
has  purchased. 

(c)  By  death  of  a  partner.     The  dissolution  takes 
place  the  instant  any  one  of  the  partners  dies.     Im- 
mediately   upon    the  death  of   a  partner,  his   legal 
representative  or  heir  is  entitled  to  his  interest  in 
the  partnership,  and,  therefore,  a  settlement  of  the 
partnership  affairs  must  be  had. 

(d)  By  bankruptcy,  either  of  the  partnership  or  of 
an   individual   member   of  the   partnership.     When 
one  of  the  partners  becomes  bankrupt,  his  trustee 


CONTRACTS  OF  PARTNERSHIP      257 

in  bankruptcy  has  a  right  to  his  share  of  the  partner- 
ship for  the  benefit  of  the  bankrupt's  creditors  and, 
therefore,  the  partnership  must  be  dissolved. 

(e)  By  insanity  of  any  partner,  because  his  com- 
mittee or  guardian  will  be  entitled  to  his  share  of  the 
partnership  property  and  the  insane  partner  is  no 
longer  able  to  participate  in  the  partnership  affairs. 

(/)  By  decree  of  court,  when  in  the  judgment  of  the 
court  it  seems  necessary  or  desirable  that  the  part- 
nership be  dissolved. 

Upon  dissolution  there  must  be  a  strict  accounting 
between  the  partners  in  accordance  with  the  articles 
of  agreement,  or  in  the  absence  of  any  written  agree- 
ment, in  accordance  with  law.  All  debts  must  first 
be  paid  and  whatever  surplus  remains  must  be  divided 
among  the  partners. 

Notice  of  Dissolution.  —  Notice  of  dissolution  must 
be  sent  to  all  creditors  of  the  partnership  and  to  any 
who  have  given  credit  to  the  partnership.  A  notice 
must  also  be  published  in  a  newspaper  for  the  benefit 
of  those  who  have  had  no  dealings  with  the  partner- 
ship, but  who  might  be  induced  to  extend  credit  upon 
the  strength  of  the  partnership  relation.  It  is 
generally  held  that  notice  of  dissolution  must  ac- 
tually be  communicated  to  those  who  are  or  have 
been  upon  the  books  of  the  partnership  as  creditors. 
A  retiring  partner  who  fails  to  give  proper  notice  of 
his  retirement  will  continue  to  be  liable  as  a  partner 
to  those  who  give  credit  to  the  partnership  without 
knowledge  of  the  fact  that  he  has  withdrawn. 


258  CASES   ON   PARTNERSHIP 

LESSON   LXVIII 

138.   CASES-  ON  PARTNERSHIP. 

(1)  Bagley  v.  Smith,  roN.  Y.  489.  —  Bagley,  Smith, 
and  one  other  formed  a  copartnership  under  articles 
of  copartnership   in  which   it  was   stated   that  the 
partnership  was  to  continue  for  a  term  of  four  years 
and  one  month.     Before  the  expiration  of  two  years, 
while  Bagley  was  away,  Smith  and  the  other  partner 
published  a  notice  of  dissolution,  and  immediately 
formed    a   new   partnership   excluding   Bagley,   who 
brings  an  action  for  damages  which  he  has  sustained 
as  a  result  of  the  dissolution. 

(2)  Harris  v.  Peabody,  73  Me.  262.  —  Royal  Wil- 
liams and  James  A.  Norton  were  copartners  under 
the  name  of  Williams-Norton.     Upon  their  own  re- 
quest they  were  individually  and  as  copartners  duly 
adjudged  insolvent  debtors.     The  assets  of  the  part- 
nership amounted  to  $1.19  and  were  absorbed  by  the 
expenses  of  selling  them.     Norton's   individual  es- 
tate had  no  assets  while  Williams's  had  individual 
property   to   the   extent   of  $1177.36.     There   were 
claims  against  the  partnership  amounting  to  more 
than    $2200 ;    against    Williams's  individual    estate 
$1133.67;     and    against   Norton's   individual   estate 
there   were   no   claims.     The   partnership    creditors 
claim  that  they  should  share  Williams's  individual 
estate  with  his  individual  creditors  pro  rata.     This 
action  was  brought  to  enforce  this  alleged  right. 


CASES  ON   PARTNERSHIP  259 

(3)  Griffith  v.  Buffum,  22  Vt.  181. — Buffum  and 
Ainsworth   made   an   agreement   under  which   they 
were  to  work  together  in  the  business  of  manufactur- 
ing marble.     Buffum  was  to  furnish  the  marble  and 
Ainsworth  was  to  pay  him  one  half  of  the  cost  of  it. 
Buffum  was  to  board  Ainsworth,  and  both  were  to 
contribute  their  labor  and  skill  in  the  business,  and 
the  profits  of  the  business  were  to  be  equally  divided 
between  them.     This  action  was  brought  by  Griffith 
to  require  Buffum  to  pay  for  marble  purchased  for 
use  under  the  terms  of  the  above  agreement.     The 
question  as  to  whether  Buffum  and  Ainsworth  were 
in  reality  partners  was  submitted  to  the  court. 

(4)  Hessv.  Lowrey,  122  Ind.  225.  —  Luther  W.  Hess 
and  Frank  C.  Hess  were  partners  in  the  practice  of 
medicine  and  surgery.     Luther  W.   Hess  set  a  dis- 
located shoulder  for  Lowrey  and  the  work  was  so 
poorly  done  that  it  caused  Lowrey  much  trouble  and 
expense.     This    action    was    brought    against    both 
Luther  W.   Hess   and   Frank  C.   Hess   as   partners. 
The  question  of  the  liability  of  Frank  C.   Hess  is 
submitted  to  the  court,  Luther  W.  Hess  having  died 
during  the  time  this  action  was  pending. 

(5)  Murphy  v.  Crafts,  13  La.  Ann.  519.  —  Murphy 
and  Crafts  were  partners  transacting  business  in  the 
city  of  New  Orleans.     One  of  the  statements  con- 
tained   in   their   articles    of  copartnership   was    the 
following :    *'  We  will  not  indorse  any  note,  draft,  or 
give  our  signatures  separately  or  collectively  except 
for  our  legitimate  business  purposes."     In  violation 


260  CASES  ON  PARTNERSHIP 

of  this  article,  Crafts  accepted  in  the  partnership 
name  bills  of  exchange  to  the  amount  of  $12,566  for 
the  benefit  and  accommodation  of  his  brother-in-law, 
John  C.  Robertson.  Robertson  failed  in  business 
and  the  firm  of  Murphy  and  Crafts  were  required  to 
pay  the  acceptances  made  by  Crafts  as  stated  above. 
Murphy  brings  this  action  against  Crafts  for  the 
amount  which  he  was  required  to  pay  as  a  result  of 
the  acceptances  referred  to  above. 

(6)  Harvey  v.  Childs  et  at.,  28  Ohio  St.  319.  —  Potter 
went  to  Childs  and  told  him  that  he  had  contracted 
for  about  two  carloads  of  hogs,  to  be  delivered  at 
Loudonville  the  next  day,  but  had  not  the  money  to 
pay  for  them.  He  asked  Childs  to  advance  the 
money  and  take  an  interest  in  the  hogs.  Childs 
refused.  Thereupon  Potter  proposed  that  if  he 
would  let  him  have  the  money  to  enable  him  to  pay 
for  the  hogs  he  had  bought,  and  others  he  might  have 
to  buy  to  make  the  two  carloads,  he,  Childs,  should 
take  possession  of  the  hogs  when  carred  at  Loudon- 
ville, as  security  for  the  money,  take  them  to  Pitts- 
burgh, sell  them,  and  take  his  pay  from  the  proceeds 
of  the  sale;  that  he  might  have  one  half  the  net 
profits  of  the  venture,  and  that  in  no  event  should 
Childs  sustain  any  loss,  but  the  money  advanced  by 
him  should  be  fully  paid  by  Potter  in  case  the  amount 
realized  from  the  sale  of  the  hogs  was  insufficient. 
Childs  accepted  the  proposition,  and  it  being  agreed 
that  $2500  would  be  enough  to  pay  for  the  two  car- 
loads, he  advanced  that  sum  to  Potter.  Afterward, 


CASES   ON   PARTNERSHIP  261 

without  the  knowledge  of  Childs,  Potter  bought  the 
hogs  in  question  of  Harvey,  on  his  own  credit,  and 
they  made  part  of  the  two  carloads  of  hogs  which 
were  taken  possession  of  by  Childs,  sold  in  Pittsburgh, 
and  the  avails  of  the  sale  appropriated  in  payment 
of  the  money  advanced  by  him.  No  profits  were 
made.  The  avails  of  the  sale  were  insufficient  to 
pay  the  amount  advanced  by  Childs,  and  Potter 
paid  him  the  deficiency,  and  for  his  time  and  expense 
in  the  transaction. 

The  question  to  be  considered,  then,  is,  are  the 
defendants  by  construction  of  law  to  be  regarded 
partners  as  to  the  plaintiff  being  a  third  person  in 
the  debt  incurred  to  him  by  Potter  in  his  own  name  ? 

(7)  Chester   v.    Dicker  son,   54   N.    Y.   i. — Chester 
bought  lands  of  a  real  estate  firm  including  Dicker- 
son,  Reed,  Jones,  and  DeWitt.     Certain  members  of 
the  firm  including  Reed,  but  not  including  Dickerson, 
had  arranged  to  have  a  quantity  of  oil  scattered  over 
the  surface  of  the  ground  that  was  to  be  sold  to 
Chester,  who  desired  oil  land.     As  a  result  of  this 
fraud,  thinking  the   property  offered   him  was  oil- 
bearing  land,  Chester  purchased  it.     Afterward  the 
fraud  was  discovered  and  Chester  brings  an  action 
against   Dickerson   as   one   of  the   partners   for  the 
damage  which  he  sustained. 

(8)  Johnston  v.  Dutton,  27  Ala.  245.  —  Johnston  & 
Co.  was  composed  of  Johnston,  Fogg,  and  Vander- 
slice.     Several  notes  were  given  in  the  firm  name  by 
Fogg.     Johnston,  who  was  sued  on  these  notes  as  a 


262  CASES   ON   PARTNERSHIP 

partner,  denied  liability  on  the  ground  that  he  had, 
before  the  notes  were  drawn,  given  personal  notice 
to  Dutton  and  had  also  published  a  notice  in  the 
newspaper  to  the  effect  that  he,  Johnston,  would  not 
be  bound  by  any  future  contracts  made  by  Fogg 
without  Johnston's  consent.  He  did  not  withdraw 
from  the  partnership,  but  merely  informed  the  public 
and  creditors  that  he  would  not  be  responsible  for 
Fogg's  actions  unless  he  consented.  This  action  was 
brought  and  the  question  of  Johnston's  right  to  re- 
nounce liability  for  Fogg's  acts  was  the  question  in- 
volved in  this  case. 

(9)  Lindsey  v.  Stranahan,  129  Pa.  St.  635.  —  Stran- 
ahan  had  carried  on  business  alone  prior  to  1876, 
when  he  sold  a  half  interest  in  his  business  to  J.  K. 
Lindsey.  After  the  new  firm  was  formed,  entire 
management  and  control  of  the  business  was  left  to 
Lindsey.  When  settlement  by  Stranahan  and  Lind- 
sey was  made,  Lindsey  claimed  compensation  for 
managing  the  business.  No  express  agreement  was 
made  regarding  this  matter. 


LESSON  LXIX 

(i)  Morris  v.  Peckham,  51  Conn.  128.  —  Plaintiff 
agreed  orally  to  assign  to  defendant  a  one-half 
interest  in  an  invention  for  making  patent  screw 
drivers,  defendant  agreeing  to  furnish  capital  to  pro- 
cure the  patents  and  to  purchase  the  machinery  and 


CASES  ON   PARTNERSHIP  263 

stock,  and  they  were  then  to  engage  in  manufactur- 
ing the  screw  drivers.  After  conducting  the  business 
one  year,  defendant  refused  to  continue  and  to  fur- 
nish more  funds.  Plaintiff  brought  an  action  to 
compel  specific  performance  of  the  partnership  agree- 
ment, claiming  that  the  partnership  was  to  continue 
for  seventeen  years,  the  life  of  the  patent.  No  evi- 
dence was  introduced  tending  to  show  that  the  part- 
nership was  not  to  continue  during  the  life  of  the 
patent  which  was  seventeen  years. 

(2)  Milmo  National  Bank  v.  Bergstrom,  I  Tex.  Civ. 
App.  151.  —  Defendant  and  one  Carter  were  engaged 
as  partners  for  one  year  in  dealing  in  hides,  wool,  and 
produce,  under  the  name  of  A.  N.  Carter.     At  the 
time  Carter  opened  a  credit  account  with  plaintiff, 
he  informed  plaintiff  that  defendant  was  his  partner. 
The  money  sued  for  had  been  loaned  after  defendant 
had   withdrawn   from   the    firm,    but   this   was   not 
known  to  plaintiff.     Should  defendant  be  held  liable 
for  the  money  so  loaned,  and  if  so,  on  what  ground  ? 

(3)  Hicks  v.  Cram,  17  Vt.  449.  —  Defendants  were 
sued    as    partners    doing  business    under  the   name 
of    Cram    &    Hutchinson.     Defendant    Hutchinson 
claimed  that  he  was  not  a  partner  and  had  no  in- 
terest in  the  business,  but  that  his  son  was  the  part- 
ner.    It  was  shown  that  defendant  had  held  himself 
out  as  a  partner,  and  when  Cram  had  stated  that 
Hutchinson  was  a  partner,  he  had  made  no  denial. 

(4)  Moore  v.  Powell,  79  Ga.   524. — This  was  an 
action  brought  against  Marbut   and   Powell,   doing 


264  CASES  ON   PARTNERSHIP 

business  under  the  firm  name  of  S.  P.  Marbut. 
Powell  denied  being  a  partner.  He  contributed  the 
use  of  a  dwelling,  storehouse,  and  $200,  which  he 
called  a  loan,  and  Marbut  contributed  his  time  to  the 
business  and  $200.  No  agreement  was  made  as  to 
the  rent  of  the  house  or  the  interest  on  the  money, 
but  Powell  was  to  receive  one  half  of  the  profits  of 
the  business  as  profits  and  not  as  compensation  for 
the  use  of  the  house  and  money. 

(5)  Bush    v.    Beecher,    45    Mich.    188.  — Beecher 
owned  a  hotel  and  Williams  agreed,  in  writing,  to 
hire  the  use  of  it  from  day  to  day,  to  keep  it  open  as 
a  hotel,  and  to  pay  Beecher  daily  a  sum  equal  to  one 
third  of  the  gross  receipts.     Plaintiff  sold  Williams 
a  bill  of  goods  and  then  sought  to  hold  Beecher  as  a 
partner.     The   goods    were   sold    to    Williams,   and 
Beecher  was  never  held  out  as  being  in  partnership 
with  him. 

(6)  Drake   v.   Thyng,    37   Ark.   228.  —  Drake   and 
Thyng  were  partners  in  the  brickmaking  business. 
While  Drake  was  away,  Thyng  sold  the  stock  and 
plant  to  a  third  party  for  an  insignificant  and  in- 
adequate sum.     Drake   brought  this   action  to   set 
aside  the  sale. 

(7)  Merry  v.  Hoopes,  in  N.  Y.  415.  —  Hoopes  and 
Merry  were    copartners    engaged  in  manufacturing 
galvanized  iron  under  two  trade  marks,  one  of  the 

'  Lion  brand,"  and  the  other  the  "  Phoenix  brand." 
Upon  the  dissolution  of  the  firm,  defendant  bought 
the  business.  Thereafter,  plaintiff  brought  this 


CASES  ON  PARTNERSHIP  265 

action  to  restrain  him  from  the  use  of  the  above- 
named  trade  mark's,  nothing  having  been  said  about 
them  in  the  bill  of  sale. 

(8)  Hodge  v.    Twitchell,  33   Minn.  389.  —  Hodge, 
Twitchell,  and  Ruby  agreed  to  purchase  real  prop- 
erty together,  each  to  pay  one  third  of  the  cost  and 
to   divide   the   property   equally.     Twitchell   called 
their  attention  to  a  lot   and   advised  its  purchase. 
While  they  were  considering  it,  he  secretly  made  an 
agreement   with    the   owner   that    if  he,   Twitchell, 
found  a  purchaser  for  the  remainder  of  the  lot  at 
$2500,  the  original  price,  the  seller  would  give  him 
a  certain  part  of  the  lot  for  his  services.     Twitchell 
then  told  his  partners  that  a  part  was  sold,  but  the 
balance  could  be  obtained  for  $2500,  and  urged  its 
purchase.     It  was  taken  upon  his  recommendation, 
and  the  portion  promised  Twitchell  was  conveyed  to 
his   wife,   in   pursuance   of  the   owner's   agreement. 
This  action  was  brought  to  recover  the  property  so 
conveyed  to  Twitchell's  wife. 

(9)  Staples  v.  Sprague,  75  Me.  458.  —  Five  persons 
had  agreed  to  cut  and  pack  a  quantity  of  ice  for  sale, 
and  after  deducting  all  expenses  to  divide  the  pro- 
ceeds equally.     One  of  the  members,  with  the  con- 
sent and  approval  of  two  others,  sold  a  large  quantity 
of  the  ice.     The  remaining  two  brought  suit  to  charge 
the  others  for  damages  in  selling  the  ice  at  what  they 
claimed  to  be  too  low  a  price. 


LESSON  LXX 
CORPORATIONS 

139.  DEFINITION. 

140.  How  CREATED. 

141.  KINDS. 

142.  POWERS. 

139.  Definition.  —  A  corporation  has  been  defined 
as  an  artificial  person.     It  is  a  collection  of  individ- 
uals who  are  associated  together  in  such  a  way  as  to 
permit  them  to  perform  acts  the  same  as  an  individ- 
ual could  if  acting  alone,  so  long  as  these  acts  are 
within  the  powers  conferred  by  the  charter  under 
which  the  corporation  is  organized. 

Modern  business  requirements  have  become  so 
complex  and  commercial  enterprises  so  large  that  it 
has  become  necessary  to  adopt  a  form  of  business 
organization  that  will  be  permanent,  will  permit  of 
centralization  of  management,  and  will  enable  men 
to  raise  large  amounts  of  capital  for  the  prosecution 
of  business. 

140.  How  Created.  —  Corporations  are  generally 
formed  under  a  general  law  which  provides  that  a 
designated  state  official  shall  have  the  power  to  re- 
ceive articles  of  incorporation,  and  to  grant  charters, 

266 


CORPORATIONS  .  267 

but  some  corporations  are  chartered  by  a  special  act 
of  a  legislative  body. 

The  charter  sets  forth  the  express  powers  which 
are  conferred  upon  the  corporation,  and  is  in  reality 
a  contract  between  the  corporation  and  the  state. 
It  is  quite  customary  for  the  state  to  reserve  in 
charters  the  right  to  revoke  them  at  any  time. 

Articles  of  Incorporation  are  prepared,  setting 
forth  the  object  of  the  corporation,  names  and  ad- 
dresses of  the  incorporators,  the  proposed  place  of 
business  and  name  of  the  company,  and  any  other 
important  facts,  and  these  articles  of  incorporation 
are  filed  with  an  official  designated  by  law  to  receive 
them. 

The  law  of  each  state  requires  that  a  specified  part 
of  the  capital  stock  shall  be  subscribed,  a  stated  part 
of  the  total  subscription  shall  be  paid  in,  and  a  cer- 
tain number  of  directors  shall  be  residents  of  the 
state. 

141.  Kinds  of  Corporations.  —  An  ecclesiastical 
corporation  is  one  which  is  organized  for  religious 
purposes. 

A  lay  corporation  is  one  that  is  organized  for  secular 
purposes. 

An  eleemosynary  corporation  is  one  that  is  or- 
ganized for  purposes  of  charity  or  philanthropy. 

A  public  corporation  is  one  that  is  organized  for 
governmental  purposes.  An  incorporated  city  is  a 
good  illustration  of  this  kind. 

A  private  corporation  is  one  that  is  organized  by 


268  .          CORPORATIONS 

individuals,  wholly  or  in  part,  for  carrying  on  busi- 
ness for  private  gain. 

142.  Powers.  —  Among  the  usual  powers  that 
are  conferred  upon  a  corporation  expressly  by  its 
charter,  or  by  implication,  are  the  following : 

The  right  of  perpetual  succession.  The  corporation 
may  continue  for  a  specified  number  of  years  or  in- 
definitely according  to  the  charter.  The  death  of  a 
stockholder  or  any  of  the  other  changes  in  the  con- 
dition of  the  stockholders,  which  would  dissolve  a 
partnership,  will  have  no  effect  upon  a  corporation. 

The  right  to  sue  and  be  sued  in  the  corporate  name 
is  one  of  the  powers  granted  to  corporations.  In  a 
partnership,  suits  must  be  brought  against  the  part- 
nership, or  by  the  partnership,  in  the  names  of  the 
individual  members  of  the  firm. 

A  corporation  may  purchase,  hold,  and  sell  real 
estate  in  its  corporate  name,  if  this  should  be  neces- 
sary or  desirable  in  connection  with  the  business 
which  the  corporation  was  chartered  to  carry  on. 

A  corporation  has  the  right  to  adopt  and  use  a 
corporate  seal. 

It  is  also  provided  that  the  corporation  may  have 
the  right  to  make  such  by-laws  as  may  become  neces- 
sary in  the  prosecution  of  its  business,  and  which  are 
not  at  variance  with  the  charter. 

In  addition,  such  implied  powers  as  may  be  neces- 
sary to  give  full  effect  to  the  powers  enumerated 
above,  and  any  others  that  may  be  provided  for  in 
the  charter,  are  possessed  by  the  corporation. 


CORPORATIONS  269 

The  usual  powers  and  rights  of  banks  and  insurance 
companies  cannot  be  implied  from  any  statements 
in  a  charter.  Such  powers  must  be  specifically  con- 
ferred. 

A  corporation  cannot  enter  into  a  partnership 
with  other  corporations,  or  with  individuals,  as  the 
liabilities  of  partners  are  different  from,  and  incon- 
sistent with,  the  liabilities  of  stockholders. 


LESSON  LXXI 

CORPORATIONS  —  CONTINUED 

143.  CAPITAL  STOCK. 

144.  KINDS  OF  STOCK. 

145.  VOTING. 

146.  MANAGEMENT. 

147.  DIVIDENDS. 

143.  Capital  Stock. --The  capital  stock  is  the 
amount  of  capital  that  is  authorized  by  the  charter, 
and  is  the  maximum  amount  which  may  be  sold  with- 
out formally  applying  for  an  increase.  A  company 
may  be  organized  with  a  capital  stock  very  much 
larger  than  the  amount  of  capital  actually  desired 
in  the  business.  For  example,  a  company  may  be 
authorized  to  begin  business  with  a  capital  stock  of 
$100,000,  and  may  sell  shares  of  stock  to  the  extent 
of  $50,000,  keeping  the  balance  to  be  disposed  of 
later,  as  occasion  may  require. 


270  CORPORATIONS 

In  the  articles  of  incorporation,  it  is  stipulated 
that  the  capital  stock  shall  be  divided  into  a  certain 
number  of  shares,  having  a  stated  par  value.  The 
usual  par  value  of  the  stock  of  business  corporations 
is  one  hundred  dollars.  The  shares  of  stock  are 
represented  by  certificates  and  when  a  stockholder 
desires  to  sell  his  interest  in  the  business,  he  effects 
the  sale  by  delivering  his  certificate  of  stock  to  the. 
purchaser,  together  with  a  power  of  attorney  which 
is  printed  on  the  back  of  the  certificate,  authorizing 
some  officer  of  the  company  to  transfer  the  stock 
from  his  name  to  that  of  the  purchaser  on  the  books 
of  the  corporation.  A  new  certificate  will  then  be 
issued  to  the  purchaser.  No  transfer  is  complete 
until  the  records  on  the  corporation's  books  are 
changed.  When  dividends  are  to  be  paid,  a  date 
is  set  as  the  latest  date  when  transfers  on  the 
books  can  be  made,  and  all  who  stand  on  the 
books  as  stockholders  on  that  date  are  entitled 
to  dividends. 

144.  Kinds  of  Stock.  —  Common  stock  is  the  stock 
upon  which  dividends,  are  paid  after  the  preferred 
stockholders  have  received  their  share  of  the  profits, 
if  any  profits  remain. 

Preferred  stock  is  the  stock  upon  which  a  specified 
rate  per  cent  of  dividend  is  payable  each  year,  provid- 
ing the  profits  of  the  business  are  sufficient  to  pay  it. 

In  some  cases,,  cumulative  preferred  stock  is  issued 
which  provides  that  a  certain  dividend  shall  be  paid 
each  year,  and  in  the  event  of  failure  to  pay  this 


CORPORATIONS  271 

dividend  in  any  year,  the  amount  not  paid  will  be- 
come a  first  claim  against  the  profits  of  each  succeed- 
ing year  until  all  the  dividends  on  this  class  of  stock 
have  been  paid. 

When  all  the  capital  stock  has  been  issued  and 
more  working  capital  is  needed,  it  may  be  desirable 
for  the  stockholders  to  return  part  of  their  stock 
to  the  treasury  to  be  sold  for  cash  required  for  im- 
mediate use.  Treasury  stock  is  the  name  usually 
applied  to  any  part  of  the  capital  stock  which  is  so 
returned  by  the  stockholders  to  be  sold  for  the  pur- 
pose of  raising  additional  working  capital. 

145.  Voting.  —  Each  stockholder  has  one  vote  for 
each  share  of  stock  which  he  owns,  and  a  majority 
vote  of  the  stockholders  is  necessary  for  the  election 
of  officers. 

In  some  companies  cumulative  voting  is  provided 
for.  Under  this  plan  a  stockholder  may  cast  one 
vote  on  each  question  for  each  share  of  stock  which  he 
holds.  If  he  prefers  not  to  vote  on  any  proposition, 
he  saves  his  vote  for  some  other  question,  thus  dou- 
bling his  vote  on  that  question.  In  this  way  minority 
stockholders  may  unite  on  an  important  proposition 
and  outvote  the  majority. 

One  entitled  to  vote  at  a  meeting  of  stockholders 
may  give  his  right  to  vote  to  another  person  who 
will  vote  in  his  place.  This  is  called  voting  by  proxy. 

146.  The     Management    of    the    corporation    is 
usually   vested   in   a   Board   of  Directors,   who   are 


272  CORPORATIONS 

elected  by  the  stockholders  from  their  number,  to 
serve  for  one  year  without  pay.  While  the  services 
which  these  directors  render  are  gratuitous,  it  has 
been  held  that  they  are  liable  for  any  misconduct, 
negligence,  or  fraud,  in  the  handling  of  the  corpora- 
tion affairs.  The  directors  elect  the  officers  of  the 
corporation,  which  are  usually  president,  vice 
president,  treasurer,  and  secretary.  These  officers 
carry  out  the  instructions  of  the  Board  of  Directors, 
to  whom  they  are  directly  responsible.  In  some 
corporations,  one  of  the  directors  is  chosen  to  act 
as  the  executive  head  of  the  business,  and  is  known 
as  the  managing  director. 

147.  Dividends. -- The  profits  of  the  corporation 
are  distributed  to  the  stockholders  in  the  form  of 
dividends,  when  so  voted  by  the  Board  of  Directors. 
Each  common  stockholder  receives  a  pro  rata  share, 
if  all  the  stock  is  common,  and  in  case  there  is  pre- 
ferred stock,  a  pro  rata  share  of  what  remains  after 
the  preferred  stockholders  have  been  paid  the 
amount  which  the  company  has  agreed  to  pay 
them. 

A  stockholder,  who  believes  that  dividends  are 
being  wrongfully  withheld,  may  institute  proceedings 
against  the  Board  of  Directors  in  a  court  of  law,  and 
determine  if  in  justice  to  the  stockholders  a  dividend 
should  be  declared. 

Dividends  can  be  paid  out  of  profits  only.  A 
corporation  has  no  right  to  declare  dividends  to  be 
paid  out  of  capital,  as  this  would  mislead  the  public 


CORPORATIONS  273 

in  the  belief  that  the  business   is   more  prosperous 
than  it  is. 

It  sometimes  happens  that  stock  dividends  are  de- 
clared by  the  Board  of  Directors.  In  this  case, 
each  stockholder  receives  a  pro  rata  share  of  the  un- 
sold stock,  or  a  portion  of  it,  which  remains  in  the 
treasury,  in  lieu  of  a  cash  dividend. 


LESSON   LXXII 
CORPORATIONS  —  CONTINUED 

148.  ULTRA  VIRES  ACTS. 

149.  LIABILITIES  OF  STOCKHOLDERS. 

150.  DISSOLUTION. 

148.  Ultra  Vires  Acts.  —  A  corporation  must  keep 
strictly  within  the  powers  conferred  upon  it  in  its 
charter.  When  it  makes  contracts  about  matters 
outside  of  the  scope  of  the  business  for  which  the 
corporation  was  created,  these  contracts  are  said  to 
be  ultra  vires  and  are  void. 

If  money  has  been  paid  to  the  corporation  by  a 
party  not  a  member  of  the  corporation,  such  party 
can  bring  an  action  against  the  corporation  to  re- 
cover the  amount  so  paid,  but  he  cannot  enforce  the 
contract.  A  corporation  cannot  derive  an  advantage 
from  the  fact  that  an  act  was  ultra  vires. 

If  ultra  vires  acts  of  a  serious  nature  are  committed 
by  a  corporation,  this  may  be  a  sufficient  ground  upon 


274  CORPORATIONS 

which  to  bring  an  action- in  a  court  of  equity,  asking 
for  the  revocation  of  the  charter. 

149.  Liabilities     of     Stockholders.  —  Unlike     the 
members  of  a  partnership,  the  stockholder  is  liable 
only  to  the  extent  of  his  subscription  to  the  capital 
stock.     His  private  property  cannot  be  attached  to 
satisfy  the  debts  of  the  corporation,  except  to  the 
extent  of  any  unpaid  portion  of  the  amount  which  he 
subscribed.     In  some  cases,  such  as  banks,  a  double 
liability  is  imposed  upon  the  stockholders.    This  is  done 
to  furnish  additional  security  to  those  dealing  with 
a  corporation  which  is  doing  a  semipublic  business. 

After  all  obligations  of  the  corporation  are  paid, 
the  assets  are  distributed  pro  rata,  according  to  the 
quantity  of  stock  held  by  each  stockholder,  when  the 
corporation  is  dissolved. 

If  the  stockholders  withdraw  for  their  private  use 
any  of  the  assets  of  the  company,  to  the  detriment  of 
creditors  of  the  company,  they  will  be  liable  individ- 
ually to  such  creditors  for  the  amounts  so  received. 

150.  Dissolution.  —  A    corporation    may    be    dis- 
solved by : 

(a)  Limitation.     By  limitation  is  meant  the  expira- 
tion of  the  time  stated  in  the  charter. 

(b)  Voluntary  dissolution.    The  charter  is  a  contract 
between  the  state  and  the  corporation,  and  cannot 
be  surrendered  except  with  the  consent  of  the  state 
and  in  accordance  with  formalities  prescribed  by  the 
state.     In  every  case  creditors  must  be  satisfied. 


CASES  ON  CORPORATIONS  275 

(c)  Repeal  of  the  charter  by  the  state,  when  the  right 
to  repeal  was  reserved  by  the  state  in  the  charter. 
Since  the  charter  constitutes  a  contract  between  the 
state  and  the  corporation,  the  state  cannot  repeal 
the  charter  unless  it  reserved  the  right  at  the  time 
the  charter  was  granted. 

(d)  By  forfeiture  of  the  charter,  upon  the  decree  of  a 
proper  court  for  non-use  or  mis-use  of  the  powers 
granted  to  the  corporation.     Mere  failure  to  use,  or 
mis-use  of  the  charter  powers  does  not  itself  effect 
dissolution,  but  either  will  serve   as  a  ground  upon 
which  an  action  may  be  brought  in  a  proper  court  to 
dissolve  the  company.     Combinations  in  unreason- 
able restraint  of  trade  have  been  dissolved  for  mis- 
using their  corporate  powers. 

A  foreign  corporation  in  any  state  is  one  that  is 
chartered  outside  that  state.  Each  state  may  pre- 
scribe regulations  under  which  such  corporations 
may  do  business  within  its  jurisdiction,  and  such 
regulations  must  be  strictly  complied  with  by  all 
foreign  corporations  seeking  to  do  business  there.  - 


LESSON  LXXIII 
.151.   CASES   ON   CORPORATIONS. 

(i)   Brisay  v.  Star  Company,  13  Misc.  (N.  Y.)  349. 
-The  defendant  was  a  corporation  organized  for  the 
purpose  of  printing,   publishing,   and   selling  news- 
papers.    In  its  newspaper  it  printed  an  offer  to  pay 


276  CASES  ON   CORPORATIONS 

$500  to  the  heir  of  any  person  who  met  death  by 
accident,  and  who  had  on  his  person  at  the  time  of 
his  death  a  copy  of  the  current  issue  of  the  paper. 
The  plaintiff  was  the  mother  and  heir  of  a  person  who 
was  killed  with  a  copy  of  the  paper  on  his  person,  all 
as  required  by  the  offer,  and  she  brought  suit  for 
the  3500. 

(2)  Brisbane  v.  D.  L.  &  W.   R.  R.  Co.,  25  Hun. 
(N.  Y.),  438.  —  Benedict  was  the  owner  of  ten  shares 
of  the  stock  of  the  defendant  company.     The  cer- 
tificate stated  that  he  was  entitled  to  the  ten  shares 
transferable  only  on  the  books  of  the  company  upon 
surrender  of  the  certificate.     Benedict  in  1856  sold 
his  stock  to  Brisbane  and  executed  a  power  of  attor- 
ney to  Brisbane  to  transfer  the  shares  on  the  books 
of  the  company.     Brisbane  took  the  certificate,  but 
the  transfer  on  the  books  was  not  made.     Benedict 
died  and  after  his  death,  in  1876,  his  administrator 
procured    a   transfer   of  the   shares   to   himself  and 
also  procured  the  payment  of  dividends  credited  to 
Benedict   between    1856   and    1876.     Brisbane   sued 
the  company  for  the  value  of  the  ten  shares  trans- 
ferred to  the  administrator  and  also  for  the  amount 
of  the  dividends  paid  to  him. 

(3)  Siegman  v.  Kissel,  65  Atl.  Rep.  910.  —  Kissel 
was  a  director  in  the  Electric  Vehicle  Company  and 
during  his  term  of  office  voted  to  declare  two  divi- 
dends,   amounting   to  $325,000,  out  of  the   capital 
and  not  out  of  the  profits  of  the  company.     Siegman 
sued  as  a  stockholder  to  compel  Kissel  to  repay  to 


CASES   ON  CORPORATIONS  277 

the  company  the  amount  of  the  two  dividends  as 
declared.  Kissel  pleaded  that  a  large  majority  of 
the  stockholders  had  approved  the  payment  of  the 
dividends  and  had  waived  the  right  to  recover 
them. 

(4)  Walker  v.  Lewis,  49  Tex.  123. — Walker  was  a 
stockholder   in    an    insolvent    corporation,    holding 
stock  of  par  value  of  $10,000  on  which  he  had  paid 
to  the  company  only  $4000.     The  corporation  owed 
Lewis  $8500,  and  when  it  became  insolvent,  Lewis 
sued  Walker  for  the  amount  of  the  indebtedness  and 
obtained  a  judgment  for  the  whole  amount.     Walker 
appealed  from  the  judgment. 

(5)  Wright  v.  Hughes,  119  Ind.  324.  —  The  Franklin 
Insurance  Company  was  organized  to  conduct  a  life 
insurance   business.     It   became   financially   embar- 
rassed and  borrowed  a  large  sum  of  money,  giving  a 
bond  secured  by  a  mortgage  for  the  amount.     The 
company  failed  and  had  not  enough  assets  to  pay  its 
policyholders,  one  of  whom  brought  suit  to  have  the 
mortgage  declared  void  and  canceled,  and   to  have 
the  mortgagee  restrained  from  claiming  the  return  of 
the  money  loaned. 

(6)  Hempfling  v.  Burr  and  Sands,  59  Mich.  294.  - 
Burr  was   president   and   Sands   cashier  of  a  bank. 
Hempfling  secured  a  loan  at  the  bank  and  gave  as 
security  certain  stock.     Just  before  the  note  fell  due, 
Hempfling  asked  if  he  should  pay  the  note  or  wait 
until  his  return  from  a  contemplated  journey.     Bun- 
told  him  to  wait.    When  the  note  fell  due,  Burr  sold 


278  CASES  ON  CORPORATIONS 

the  stock  to  Sands,  paid  the  note,  and  advised  Hemp- 
fling  of  what  he  had  done.  Hempfling  then  com- 
menced an  action  for  damages.  Burr  defended  on 
the  ground  that  he  had  acted  entirely  in  an  official 
capacity  for  the  bank,  had  no  personal  interest  in  the 
transaction,  and  was  not  liable  personally. 

(7)  State  of  Alabama  v.  Capital  City  Water  Co.,  105 
Ala.  406. — The  water  company  was  chartered    to 
supply  a  city  and  its  inhabitants  with  pure,  whole- 
some, and  deep  well  water,  suitable  for  all  purposes, 
and  sufficient  in  quantity  for  all  uses  of  said  city  and 
its  inhabitants.     For  some  years  this  provision  was 
carried  out,  but  finally  the   company  supplied    im- 
pure river  water  to  the  city  on  several  occasions, 
claiming   that    the  supply  from   its   wells  was    not 
adequate.     The  state  then  brought  a  proceeding  to 
forfeit  the  charter  of  the  company,  and  after  the  pro- 
ceeding was  brought,  the  company  enlarged  its  plant 
and  was  prepared  to  furnish  proper  water. 

(8)  Mason  v.  Pewabic  Mining  Co.,  133  U.  S.  50.— 
Mason  was  a  stockholder  in  the  defendant  company. 
When  the  charter  of  the  company  expired  by  limita- 
tion, the  directors  arranged  for  a  sale  of  its  assets  to 
another  company,  and  the  stockholders  of  the  Pe- 
wabic Company  were  to  receive  their  pro  rata  share 
of  the  proceeds  in  stock  of  the  second  company  or  in 
money.     The  sale  was  authorized  by  a  large  major- 
ity of  the   stockholders,   Mason   voting   against  it. 
Mason  then  brought  suit  to  enjoin  the  transfer  of 
the  assets  of  the  Pewabic  Company  and  for  the  ap- 


CASES  ON  CORPORATIONS  279 

pointment  of  a  receiver  to  sell  the  assets  and  dis- 
tribute the  surplus  among  the  stockholders  after 
paying  the  debts. 


LESSON  LXXIV 


(1)  Paul  v.    riVgtma,  8  Wall.   (U.S.)  168.—  The 
State  of  Virginia   passed   a  law  providing  that  no 
insurance  company  not    incorporated    in    the  state 
should  be  allowed  to  do  business  there  without  ob- 
taining a  license  and  depositing  with  the  state  treas- 
urer bonds   of  a  specified   character   amounting  to 
about  $50,000.      There  was  also  passed   a  law  im- 
posing a  fine  on  any  person  who  acted  as  agent  for  a 
foreign  insurance  company  without  a  license.     Paul 
was  appointed  agent  for  Virginia  of  a  New  York  in- 
surance company.     He  demanded  a  license  to  act  as 
such  agent  and  offered  to  comply  with  all  the  re- 
quirements of  the  law,  except  the  deposit  of  the  bonds 
required.     The  license  was  refused,  but  Paul,  never- 
theless, issued  a  policy  in  the  New  York  company, 
for  which  he  was  fined  $50.     He  appealed  from  the 
judgment  to  the  Supreme  Court  of  the  United  States 
on  the  ground  that  the  Virginia  law  was  unconstitu- 
tional and  denied  the  equal  protection  of  the  laws  to 
citizens  of  various  states. 

(2)  Hastings    v.     Drew,    76    N.    Y.    9.  —  Certain 
stockholders  and  directors  of  a  steamboat  company 
took  over  for  their  own  use,  by  mutual  agreement, 
one    of  the    steamers    belonging   to    the    company. 


280  CASES  ON  CORPORATIONS 

Hastings,  a  judgment  creditor,  sued  Drew,  one  of  the 
stockholders,  for  that  part  of  the  value  of  the  steamer 
received  by  him. 

(3)  Downing    v.    Mt.    Washington    Road    Co.,    40 
N.  H.  230. — A  charter  was  granted  the  defendant 
company  to  make  and  keep  in  repair  a  road  to  the 
top  of  Mt.  Washington,  to  take  toll  of  passengers  and 
carriages,  to  build  and  own  tollhouses,  and  to  take 
land  for  a  road.     The  company  afterward  established 
a  stage  and  transportation  line  and  bought  carriages 
and    horses    for    that    purpose.     This    action    was 
brought  to  restrain  them  from  operating  the  trans- 
portation line. 

(4)  Mallory  v.  Hanaur  Oil  Works,  86  Tenn.  598.  - 
Several  corporations  were  engaged  in  manufacturing 
cottonseed  oil.     They  made  an  agreement  to  select 
a  committee,  composed   of   representatives  of  each 
corporation,  and  to  turn  over  to  this  committee  the 
properties  and  machinery  of  each  company  so  that 
the  business  of  each  might  be  operated  and  managed 
for  a  specified  time  by  this  committee  for  the  com- 
mon benefit,  the  losses  or  profits  to  be  shared  in  cer- 
tain  proportions.     This   action  was  brought  to  re- 
strain the  corporations  from  so  uniting. 

(5)  Overseers  of  the  Poor  of  Hillsdale  v.  Shear,  13 
Johns.  (N.  Y.)  495.  —  The  Board  of  Overseers  brought 
this  action  against  Shear  for  his  failure  to  support 
a  pauper,  whereby  the   town    had    been    damaged. 
Shear  had  promised  a  previous  board  that  he  would 
support  the  pauper,  but  he  defended  this  action  on 


CASES  ON  CORPORATIONS  281 

the  ground  that  the  plaintiffs  were  not  the  promisees 
of  his  promise  and  had  no  right  to  bring  the  action. 

(6)  Vanneman  v.   Young  et    al.,  52  N.  J.  L.  403.-- 
Young  and  the  other  defendants  formed  a  corporation 
called  the  Clayton  Bottle  Works  and  recorded  the 
certificate  of    incorporation    in    the   county   clerk's 
office  of  the  proper  county,  as  required  by  law,  on 
November  9,  1886.     The  law  also  required  that  the 
certificate  be  filed  with   the  secretary  of  state,  but 
this  was  not  done  until  August  17,  1887.     Between 
November  9,  1886,  and  August  17,  1887,  the  plain- 
tiff sold  certain   materials  to  the  corporation   and, 
when  he  was  not  paid  for  them,  brought  suit  against 
the  members  of  the  corporation  individually,  claim- 
ing that  they  were  liable  as  partners  since  the  cer- 
tificate of  incorporation  had  not  been  filed  with  the 
secretary  of  state  when  the  purchase  of  materials 
was  made.     Are  the  defendants  liable  as  partners  ? 

(7)  Dreisbach  v.  Price  et  al.,  133    Pa.  St.  560.- 
The  defendants  were  all  stockholders  in  the  insol- 
vent   Miner's    Bank,    of  which    Dreisbach   was   the 
assignee  for  the  benefit  of  creditors.     The  charter 
of  the   bank   provided    that   "  the   stockholders   of 
said  bank  shall  be  held  individually  liable  for  all  debts 
of  said  bank,  to  the  extent  of  double  the  amount  of 
the  stock  subscribed  for  or  held  by  them."     Relying 
on  this  clause  of  the  charter,  Dreisbach  demanded 
from  each  stockholder  $200  for  each  $100  share  of 
stock  held  by  him  and  also  demanded  certain  un- 
paid stock  subscriptions.     The  defendants  claimed 


282  CASES  ON  CORPORATIONS 

that  they  should  forfeit  their   stock   and   $100   per 
share  in  addition  instead  of  $200  per  share. 

(8)  Tracy  v.  Talmage,  14  N.  Y.  162. — The  North 
American  Trust  and  Banking  Company  purchased 
from  the  Morris  Canal  and  Banking  Company  cer- 
tain bonds  and  paid  for  them  by  time  notes,  which 
the  American  company  not  only  was  not  authorized 
to  make,  but  was  forbidden  to  make  under  statutory 
penalty.     Can   the   Morris    company   recover    in   a 
suit  on  the  notes,  or  can  it  recover  the  price  of  the 
bonds  in  any  other  way  ? 

(9)  Page  v.  Heineberg,  40  Vt.  81. — The  Vermont 
Central  Railroad  Company  purchased  certain  land 
for  the  use  of  the  railroad,  but  found  that  land  was 
not  necessary  for  such  use  and  sold  it  to  the  defend- 
ant.    Page  claimed  that  the  company  had  no  right 
to  hold  real  estate  generally;    that  when  it  was  not 
used  for  railroad  purposes,  the  land  reverted  to  the 
original   owner ;     that   consequently   the   defendant 
acquired    no   title    from    the    company,    and    Page 
brought  an  action  of  ejectment  as  the  heir  of  the 
original  owner  of  the  land. 

LESSON  LXXV 

(i)  Williams  v.  Western  Union  Telegraph  Co.,  93 
N.  Y.  162. — The  telegraph  company  was  about  to 
pay  a  dividend  to  its  stockholders  in  the  form  of 
shares  of  its  capital  stock,  when  Williams,  a  stock- 
holder, brought  this  action  to  enjoin  the  payment  of 


CASES  ON  CORPORATIONS  283 

such  dividend,  on  the  ground  that  such  dividend  was 
from  the  capital  stock  and  not  from  the  surplus 
profits  and  therefore  illegal.  It  was  proved  that  the 
company  owned  property  equal  in  value  to  the 
amount  of  its  share  capital  and  the  amount  of 
the  proposed  dividend. 

(2)  Moore   v.    Schoppert,    22    W.  Va.    282. — The 
plaintiff  was  president  of  a  company  owning  a  toll 
road.     One  of  the  counties  through  which  the  road 
passed  took  possession  of  a  tollgate  and  appointed 
Schoppert  keeper   thereof.     The   company  brought 
ejectment  proceedings  to  oust  Schoppert  from  the 
land,  and  the  county  defended  on  the  ground  that 
certain   irregularities   of  management    in   the    com- 
pany were    sufficient  to  work    a    forfeiture    of   its 
charter,    and    under   the    statute    the    county   was 
justified  in  taking  property  of  a  dissolved  corporation. 

(3)  Mayor  &  Aldermen  of  Jonesboro   v.   Me  Kee, 
2  Yer.   167. — The  plaintiff,   a  corporation,  sued  the 
defendant  for  non-payment  of  taxes.     He  defended 
on  the  ground  that  the  plaintiff's   powers  were  de- 
scribed and  limited  by  its  charter,  and  that  the  charter 
conferred  no  power  to  sue  in  its  own  name. 

(4)  Railroad    Co.    v.    Ayres,    56   Ga.    230. — The 
plaintiff  brought   suit   against  Ayres   to    recover   a 
portion  of  his  subscription  to  the  stock  of  the  com- 
pany.    Ayres  gave  evidence  that  the  stock  was  value- 
less, and  that,  although  he  had  paid  part  of  his  sub- 
scription, he  refused  to  pay  the  balance  when  the 
stock  became  valueless. 


284  CASES  ON  CORPORATIONS 

(5)  Petition    of   Argus    Co.,    138    N.  Y.   557. —A 
stockholder   in  the   Argus  Co.  made    an    agreement 
with    certain     other    stockholders    not    to    sell    his 
stock  without  giving  the  other  parties  to  the  agree- 
ment   an    opportunity   to    purchase.     Nevertheless, 
he  transferred  a  number  of  shares  to  his  son  who  had 
the  proper  transfer  made  on  the  books  of  the  com- 
pany.    The  son  then  voted  at  an  election  of  directors, 
and  it  was  sought  to  have  the  election  set  aside  on 
the  ground  that  the  son's  votes  were  illegal  and  void. 

(6)  Scovill  v.  Thayer,  105  U.  S.  143. — Thayer  sub- 
scribed for  certain  stock  in  the  Fort  Scott  Coal  and 
Mining  Co.     He  paid   20    per  cent    of  the  amount 
of  his  subscription  and    made  a  written  agreement 
with    the  company  on    a   good    consideration  that 
no     further     payments    should    be     made    for    the 
stock  and  that  full-paid  shares  should  be  issued  to 
him.     The  company  became  bankrupt,  and  Scovill, 
as  assignee  for  the  benefit  of  creditors,  sued  Thayer 
for  the  unpaid  balance  of  his  subscription. 

(7)  Winscott    v.    Investment     Co.,    63    Mo.   App. 
367. — Winscott    paid    the    defendant  $500  and   re- 
ceived  a  written   agreement  to  deliver  to  him  five 
shares   of  preferred   stock    of   the    company,   when 
issued,  or  to  return  the  money.     In   an   action  on 
the  agreement,  the  company  pleaded  that  the  cor- 
poration had  no  power  to  issue  preferred  stock,  or  to 
agree  to  do  so ;   that  the  agreement  was  void  and  of 
no  effect,  and  could  not  afford  a  basis  for  suit. 


LESSON  LXXVI 
PROCEDURE  AND  REMEDIES 

152.  IN  GENERAL. 

153.  LAW  AND  EQUITY. 

154.  JURISDICTION. 

155.  PLEADING  AND  PRACTICE. 

156.  DAMAGES. 

157.  REMEDIES,  LEGAL  AND  EQUITABLE. 

158.  PROVISIONAL  REMEDIES. 

152.  In  General. --To  permit  the  regular  and 
orderly  administration  of  the  law,  certain  forms  of 
procedure  have  been  adopted  and  strictly  adhered 
to.  The  fact  that  many  suits  are  decided  on  tech- 
nical grounds,  without  reference  to  the  merits  of 
the  case,  is  often  cited  as  a  reproach  to  our  courts  and 
judges.  Doubtlessly,  harm  may  be  wrought  in  some 
cases,  but  it  must  be  remembered  that  an  undue  re- 
laxation of  the  rules  of  procedure  would  result  in  a 
chaotic  condition  in  which  nobody  could  secure 
justice.  It  is  better  that  an  occasional  individual 
should  suffer,  than  that  the  whole  administration  of 
justice  should  be  uncertain  and  ineffective. 

In  the  old  common  law  courts  in  England  the  rules 
of  procedure  were  exceedingly  strict  and  complicated. 

285 


286  PROCEDURE  AND  REMEDIES 

They  provided  for  many  successive  steps  of  pleading 
and  counterpleading  and  the  penalty  for  a  mistake 
anywhere  along  the  line  was  the  dismissal  of  the 
suit.  By  gradual  changes  and  amendments,  chiefly 
by  the  enactment  of  practice  acts  by  the  various 
legislatures,  the  strictness  of  common  law  pleading 
has  been  done  away  with  and  now  our  rules  of  pro- 
cedure are  relatively  simple. 

153.  Law  and  Equity.  —  A  reference  to  the  his- 
tory of  courts  of  law  is  necessary  to  explain  the  im- 
portance of  the  distinction  between  law  and  equity. 
Under  the  old  English  common  law  system  a  court 
of  law  could  only  pass  upon  questions  that  could  be 
brought  before  it  by  one  or  another  of  the  recognized 
writs,  or  forms  of  action.  Thus,  if  a  man  trespassed 
on  my  land  I  could  buy  a  writ  of  trespass  and  pro- 
ceed against  him;  or,  if  a  man  kept  property  to 
which  I  was  entitled,  I  could  buy  a  different  writ  and 
proceed  against  him;  and  so  in  other  cases.  The 
number  of  these  writs  was  necessarily  limited  and 
questions  were  constantly  arising  which  were  not 
covered  by  the  writs  and  for  which,  therefore,  there 
was  no  remedy,  whereby  great  injustice  was  done. 
The  practice  then  grew  up  of  addressing  a  petition 
to  the  king,  as  the  source  and  head  of  all  justice, 
setting  forth  the  facts  of  the  case,  stating  that  the 
petitioner  could  get  no  relief  in  the  courts  of  law  and 
asking  the  king  to  do  justice  between  the  parties. 
These  petitions  became  so  numerous  that  the  king 
turned  them  over  to  his  chancellor  to  see  that  justice 


PROCEDURE  AND   REMEDIES  287 

was  done.  The  chancellor  came  to  have  a  regular 
office,  called  chancery,  for  the  disposition  of  these 
petitions,  and  to  this  day  courts  of  equity  are  fre- 
quently called  chancery  courts.  In  this  way  the 
legal  business  of  the  country  was  done  by  two  sets 
of  courts.  To  the  law  courts  went  all  cases  involving 
the  payment  of  a  sum  of  money  only,  or  the  recovery 
of  a  specific  thing.  When  the  relief  required  was 
the  performance  or  non-performance  of  an  act,  the 
court  of  equity  heard  the  case.  A  court  of  equity 
acts  in  personam,  that  is,  it  commands  a  person  to  do 
or  not  to  do  certain  things,  and  in  connection  with 
such  a  command  it  may  incidentally  award  a  sum  of 
money  as  damages.  This  distinction  is  still  found, 
in  a  more  or  less  pronounced  form,  in  all  our  systems 
of  practice. 

154.  Jurisdiction.  —  Before  a  court  can  act  in  any 
case,  it  must  have  the  parties  legally  before  it,  and 
not  until  then  does  it  have  authority  over  the  parties 
or  the  subject  of  the  action.  This  authority  is  called 
jurisdiction.  In  every  state  there  is  some  court  of 
general  jurisdiction,  whose  power  extends  throughout 
the  state.  If  any  person  in  the  state  receives  a  man- 
date of  such  court,  whether  it  be  a  summons,  subpoena, 
injunction,  or  what  not,  he  must  obey  it  or  suffer  the 
consequences.  The  power  of  such  a  court  also  ex- 
tends to  property  within  the  state,  and  the  court 
may  take  jurisdiction  of  an  action  involving  the  prop- 
erty, even  though  the  owner  of  it  may  be  beyond  the 
limits  of  the  court's  power.  This  question  of  juris- 


288  PROCEDURE  AND  REMEDIES 

diction  is  very  important,  as  any  act  performed  by  a 
court  without  jurisdiction  is  absolutely  void. 

Federal  Courts.  —  In  addition  to  the  courts  of  each 
state  in  the  Union  there  is  a  body  of  courts  known  as 
Federal  or  United  States  Courts.  These  courts  have 
jurisdiction  of  all  questions  arising  under  the  laws, 
treaties,  and  Constitution  of  the  United  States  (as 
distinguished  from  the  laws  and  constitution  of  any 
particular  state),  of  actions  between  citizens  of  differ- 
ent states,  and  of  actions  to  which  a  state  is  a  party. 
The  lowest  of  these  courts  are  the  District  Courts,  of 
which  there  are  about  eighty  throughout  the  United 
States.  From  a  District  Court  an  appeal  may  be 
taken  to  the  Circuit  Court  of  Appeals  for  the  circuit 
of  which  the  district  is  a  part,  and  from  that  court 
to  the  Supreme  Court  of  the  United  States  in  certain 
cases. 

155.  Pleading  and  Practice.  —  -  There  are  certain 
legal  terms  in  connection  with  procedure  with  which 
the  student  should  be  familiar. 

Summons.  —  A  mandate  of  a  court  requiring  the 
defendant  served  therewith  to  appear  before  the 
court  and  answer  the  complaint  of  the  plaintiff.  If 
such  appearance  and  answer  is  not  made  within  the 
specified  time,  the  plaintiff  may  take  judgment  by 
default. 

Plaintiff.  —  A  person  bringing  an  action  at  law. 
A  complainant. 

Defendant.  —  A  person  against  whom  an  action  is 
brought.  A  respondent. 


PROCEDURE  AND  REMEDIES  289 

Subpoena.  —  A  mandate  of  a  court  requiring  the 
person  served  therewith  to  appear  before  the  court 
and  testify  as  a  witness.  Failure  so  to  appear  is  con- 
tempt of  court,  and  is  punishable  by  fine  and  im- 
prisonment. 

Subpoena  duces  tecum.  —  A  subpoena  requiring  the 
prospective  witness  to  bring  with  him  certain  books 
and  papers  specified  in  the  subpoena. 

Complaint.  —  A  statement  of  the  plaintiff's  cause 
of  action  against  the  defendant. 

Answer.  -  -  The  defendant's  pleading  in  reply  to 
the  complaint,  setting  forth  his  defense. 

Counterclaim  or  Set-off.  —  A  claim  in  favor  of  the 
defendant  against  the  plaintiff  which  the  defendant 
sets  up  to  diminish  or  defeat  the  plaintiff's  recovery.- 

Demurrer.  —  A  claim  by  either  party  that,  admit- 
ting the  fact  set  forth  to  be  true,  no  cause  of  action 
has  been  stated  by  the  opposing  party.  A  demurrer 
raises  a  question  of  law  only. 

Bill  of  Particulars.  —  A  bill  of  particulars  is  an 
amplification  of  the  claim  made  by  either  party  to 
an  action,  setting  forth  in  detail  the  items  making  up 
the  claim.  In  a  proper  case  it  must  be  furnished  at 
the  request  of  the  opposing  party. 

A  Lawsuit.  -  -  The  normal  course  of  an  action  at 
law  is  as  follows  :  The  person  who  desires  to  press  his 
claim  through  the  courts  must  first  engage  the  serv- 
ices of  an  attorney,  as  an  attorney  is  an  officer  of  the 
court  and  he  alone  is  allowed  to  practice  law.  If, 
upon  examination  of  the  facts  and  the  law,  the  claim 


290  PROCEDURE  AND   REMEDIES 

seems  to  him  well  founded,  the  attorney  will  cause  a 
summons  to  be  personally  served  upon  the  defend- 
ant. With  the  summons  a  copy  of  the  complaint 
may  be  served,  or  the  complaint  may  be  withheld 
until  the  defendant  has  appeared  by  an  attorney. 
Within  a  specified  time  after  the  service  of  the  com- 
plaint, the  defendant  must  serve  his  answer  or  demur- 
rer to  the  complaint.  Issue  is  then  said  to  be  joined 
and  must  be  tried. 

If  a  demurrer  was  made  to  the  complaint,  the  issue 
is  called  an  issue  of  law  and  must  be  tried  by  a  judge 
alone,  as  a  jury  cannot  pass  upon  questions  of  law. 
If  the  plaintiff  wins  on  the  trial  of  the  demurrer,  the 
defendant  must  answer  the  complaint  or  have  judg- 
ment taken  against  him.  If  the  defendant  wins,  the 
plaintiff  must  amend  his  complaint  so  as  to  state  a 
cause  of  action,  or  the  action  will  be  dismissed. 

If  the  defendant  answers  the  complaint,  a  trial 
by  judge  and  jury  must  be  had.  The  jury  is  com- 
posed of  twelve  men  chosen  by  lot  from  a  number 
summoned  to  attend  in  court  for  that  purpose.  To 
be  eligible  to  serve  as  a  juror,  a  man  must  possess 
certain  qualifications  of  age,  property,  etc.,  and  when 
summoned  as  juror,  he  must  appear  or  be  punished 
for  contempt  of  court. 

If  the  defendant  is  successful  at  the  trial,  the  ver- 
dict of  the  jury  and  the  judgment  of  the  court  are 
in  his  favor,  the  action  is  dismissed,  and  the  costs  of 
the  action  must  be  paid  by  the  plaintiff.  If  the 
plaintiff  is  successful,  he  is  awarded  by  the  jury  such 


PROCEDURE   AND   REMEDIES  291 

amount  a£  he  has  proved  he  is  entitled  to,  and  the 
costs  of  the  action  must  be  paid  by  the  defendant.  A 
judgment  for  the  amount  of  the  damages  and  costs 
is  then  filed  in  court,  and  an  execution  issued  to  the 
sheriff  of  the  county,  requiring  him  to  take  such  prop- 
erty of  the  debtor  as  he  can  find  and  sell  it  to  satisfy 
the  judgment.  The  sheriff  must  then  take  and  sell 
the  property  under  the  execution,  or  make  a  return 
of  "  nulla  bona"  i.e.  that  he  can  find  no  goods  of  the 
debtor.  In  the  latter  case,  the  creditor  can  compel 
the  debtor  to  appear  in  court  and  submit  to  an  ex- 
amination in  supplementary  proceedings.  By  this 
examination  the  creditor  endeavors  to  learn  whether 
the  debtor  has  any  property  which  the  sheriff  could 
not  find,  and  which  can  be  seized  and  sold  to  satisfy 
his  debt. 

The  procedure  in  a  suit  in  equity  differs  consider- 
ably in  the  various  states,  but  in  general  it  may  be 
said  that  it  is  tried  by  a  judge  without  a  jury,  and 
that  the  final  judgment  commands  or  forbids  the 
performance  of  an  act,  instead  of  being  for  a  sum  of 
money,  and  that  disobedience  of  the  judgment  is 
punishable  by  fine  and  imprisonment  as  a  contempt 
of  court. 

156.  Damages. -- The  law  is  careful  to  provide 
that  a  litigant  shall  not  recover  more  than  the 
amount  of  the  damage  he  has  actually  suffered. 
This  amount  must  be  very  carefully  proven,  and  the 
plaintiff  can  recover  no  more  than  he  proves,  no 
matter  how  much  he  may  demand  in  his  complaint. 


292  PROCEDURE   AND   REMEDIES 

The  law  also  requires  that  he  shall  minimize  the 
damage  to  the  best  of  his  ability.  For  example,  if  A 
is  engaged  to  teach  a  school  for  a  year,  but  his  em- 
ployer refuses  to  allow  him  to  carry  out  his  contract, 
he  has  a  claim  for  damages  for  the  full  amount  of  his 
salary,  but  he  must  reduce  this  amount  as  much  as 
possible  by  using  every  reasonable  effort  to  obtain 
similar  employment,  and  any  amount  he  is  able  to 
earn  must  be  deducted  from  his  claim. 

It  is  often  provided  in  contracts  that  if  a  party 
fails  to  perform,  he  shall  pay  a  designated  sum  as 
liquidated  damages.  The  object  of  such  provisions 
is  to  make  recourse  to  a  lawsuit  unnecessary  to  de- 
termine the  amount  of  damages  to  be  paid.  Such 
provisions  are  looked  upon  with  suspicion,  and  if  the 
amount  is  so  far  beyond  the  actual  damage  suffered 
as  to  be  in  effect  a  penalty,  its  payment  will  not  be 
enforced. 

157.  Remedies.  —  The  only  remedy  afforded  by 
an  action  at  law  is  a  judgment  for  a  sum  of  money  as 
damages.  It  sometimes  happens  that  such  a  judg- 
ment would  not  afford  to  the  plaintiff  adequate  re- 
lief, and  in  such  cases  relief  may  be  had  in  equity. 
For  example,  when  a  contract  requires  the  delivery 
of  a  certain  piece  of  real  estate,  or  a  work  of  art,  or 
something  which  is  unique  and  for  the  loss  of  which 
money  would  not  compensate,  a  court  of  equity  may 
decree  specific  performance  of  the  contract  and  re- 
quire the  party  in  default  to  deliver  the  particular 
thing  which  was  the  subject  of  the  contract.  Again, 


PROCEDURE  AND  REMEDIES  293 

if  a  famous  singer  contracts  to  give  all  his  services  to 
a  certain  theater,  and  then  agrees  to  sing  in  some 
other  theater,  an  injunction  may  be  issued  to  pre- 
vent him  from  breaking  his  contract,  as  no  other  per- 
son can  take  his  place  and  no  money  value  can  be 
placed  on  the  loss  of  his  services. 

158.  Provisional  Remedies.  -  -  These,  remedies  are 
four  in  number,  viz.,  Arrest,  Attachment,  Injunction, 
and  Replevin,  and  are  employed  during  the  progress 
of  an  action  to  assist  or  preserve  a  party's  rights  un- 
til the  final  determination  of  the  action. 

Arrest.  —  In  an  action  on  contract  where  the  de- 
fendant was  guilty  of  fraud,  or  where  the  defendant 
has  removed  or  is  about  to  remove  his  property  with 
intent  to  defraud  his  creditors,  or  where,  by  the  final 
judgment  in  an  action,  the  defendant  may  be  re- 
quired to  perform  some  act  and  there  is  danger  that 
he  may  remove  from  the  state  and  so  render  the  judg- 
ment ineffectual,  the  defendant  may  be  arrested  by 
order  of  the  court  or  judge,  and  may  be  detained  in 
custody  unless  he  produces  satisfactory  bail. 

Attachment.  —  If  the  defendant  in  an  action  is  a 
non-resident  or  a  foreign  corporation,  or  if  he  has  de- 
parted from  the  state  or  keeps  himself  concealed  to 
avoid  service  of  process,  or  if  he  has  removed  or  is 
about  to  remove  his  property  from  the  state  with  in- 
tent to  defraud  his  creditors  or  has  assigned  or  se- 
creted it,  or  is  about  to  do  so  with  such  intent,  any  of 
the  defendant's  property  may  be  seized  by  the  sheriff 
under  a  warrant  of  attachment  and  kept  by  him  until 


294  PROCEDURE  AND  REMEDIES 

the  determination  of  the  action.  In  many  states  the 
requirements  for  attachments  are  not  so  strict,  and 
in  some  states  almost  every  action  is  commenced  by 
attachment. 

Injunction. — When  any  person  can  show  to  a  court 
sufficiently  good  cause,  he  may  obtain,  at  once  and 
without  a  hearing,  an  injunction  forbidding  the  per- 
formance of  any  threatened  act.  Such  an  injunction 
will  be  granted  only  for  a  short  time,  but  the  persons 
enjoined  must  appear  and  show  cause  why  it  should 
not  be  continued. 

Replevin. — When  a  plaintiff  has  brought  suit  to  re- 
cover a  particular  thing  from  the  defendant,  he  may 
require  the  sheriff  to  take  the  thing  into  his  custody, 
by  virtue  of  a  writ  of  replevin,  and  keep  it  until  the 
final  determination  of  its  ownership. 


INDEX 


Absolute  defense,  157. 

property,  64. 
Acceptance,  of  a  draft,  167. 

for  honor,  168. 

supra  protest,  168. 

virtual,  169. 

Accident  insurance,  204. 
Accord  and  Satisfaction,  28. 
Acts,  against  public  policy,  12. 

fraudulent,  15. 

immoral,  14. 

in  desecration  of  the  Sabbath,  14. 
Adequacy  of  consideration,  26. 
Agency,  by  estoppel,  234. 

by  necessity,  235. 

cases  on,  240. 

coupled  with  an  interest,  240. 

how  performed,  124. 

how  terminated,  238. 

ratification  of,  234. 
Agent,  denned,  233. 
Agent,  General,  235. 

Special,  235. 
Agents,  Kinds  of,  235. 
Alien  enemies,  n. 
Alteration  of  contract,  2. 
Answer,  291. 

Application  for  insurance,  192. 
Approval,  sale  on,  80. 
Arrest,  293. 
Articles,  of  copartnership,  251. 

of  incorporation,  267. 
Assignment  of  lease,  109. 
Attachment,  293. 
Attorney,  power  of,  234. 

Bailee,  defined,  124. 

liability  of,  129. 

lien  of,  128. 
Bailment,  124. 

classification,  126. 

exceptional,  137. 


Bailment,  how  created,  125. 

termination  of,  130. 

tortious,  125. 

use  of  property,  127. 

warranties  in,  129. 
Bailments,  cases  on,  131. 
Bailor,  124. 
Bank  draft,  164. 
Bargain  and  Sale,  contract  of,  71. 

deed,  112. 
Barter,  70. 
Bets  or  wagers,  14. 
Bill  of  Exchange,  156. 

foreign,  164. 

inland,  164. 
Bill  of  particulars,  289. 
Bills  of  Exchange,  Kinds  of,  164. 
Bills  of  Lading,  157. 
Bona  fide  holder,  157. 
Bond,  coupon,  157. 
Breach  of  warranty,  85. 

Capital  Stock  of  corporations,  269. 
Care,  degrees  of,  126. 
Cases,  on  agency,  240. 

on  bailments,  131. 

on  contracts,  41. 

on  corporations,  275. 

on  fixtures,  68. 

on  guaranty  and  suretyship,  225. 

on  insurance,  206. 

on  laws  of  innkeepers,  139. 

on  negotiable  instruments,  176. 

on  partnership,  258. 

on  personal  property,  88. 

on  real  property,  115. 
Casualty  insurance,  203. 
Caveat  emptor,  20. 
Chattel  mortgage,  82. 
Civil  law,  4. 
Commercial  law,  4. 
Common  Carrier,  142. 


295 


296 


INDEX 


Common  Carrier,  charges  of,  142. 

delivery  by,  146. 

liability  of,  144. 

lien  of,  143. 

of  passengers,  147. 
Common  Carriers,  cases  on,  148. 
Common  law,  2. 
Common  stock,  272. 
Complaint,  289. 
Condition,  precedent,  83. 

subsequent,  83. 
^Consent,  reality  of,  18. 
^Consideration,  adequacy  of,  26. 

as  to  time,  26. 

defined,  23. 

failure  of,  27. 

in  guaranty,  28. 

moral  obligation  as,  27. 

presumption  of,  23. 

valuable,  24. 
Constitutional  law,  2. 
Constructive  contract,  7. 

delivery,  77. 

Continuing  guaranty,  220. 
Contract,    against    public    policy, 

13- 

bilateral,  17. 
cases  on,  41. 
consideration,  23. 
construction,  7. 
defined,  5. 
discharge  of,  28. 
divisible,  30. 
elements,  6. 
executed,  8. 
executory,  8. 
express,  6. 
form  of,  6. 
formal,  7. 
implied,  6. 
indemnity,  189. 
indivisible,  30. 
in  restraint  of  marriage,  13. 
in  restraint  of  trade,  13. 
land,  112. 

made  on  Sunday,  14. 
marriage,  40. 
of  infants,  9. 
of  insane  persons,  IO. 


Contract,  of  married  women,  n. 

of  sale,  70. 

of  wagers,  14. 

oral,  7. 

parol,  7. 

parties  to  a,  8. 

quasi,  7. 

real  property,  40. 

simple,  7. 

specialty,  7. 

subject  matter,  12. 

uberrima  fides,  22. 

under  seal,  7. 

unilateral,  17. 
Contribution,  219. 
Conveyances,  in. 
Corporation,  lay,  267. 
Corporations,  defined,  266. 

capital  stock  of,  269. 

cases  on,  275. 

dissolution  of,  274. 

dividends  of,  272. 

how  created,  266. 

kinds  of,  267. 

liabilities  of  stockholders,  274. 

management  of,  271. 

powers  of,  268. 

stock  dividends,  273. 

ultra  vires  acts,  273. 

voting,  271. 
Counterclaim,  289. 
Credit,  insurance,  205. 

letter  of,  169. 
Creditor,  217. 
Criminal  law,  4. 
Curtesy,  estate  by,  105. 

Damages,  liquidated,  292. 
Days  of  grace,  176. 
Debtor,  217. 
Deed,  Bargain  and  sale,  112. 

delivery  in  escrow,  114. 

delivery  of,  1 14. 

full  covenant  warranty,  112. 

quitclaim,  in. 

recording  of,  114. 
Default,  notice  of,  221. 
Defendant,  288. 
Defenses,  kinds  of,  157. 


INDEX 


297 


Delivery  by  common  carrier,  146. 

constructive,  77. 

in  escrow,  114. 

Demand  and  presentment,  174. 
Demurrer,  289. 
Discharge  of  contract,  28. 
Dishonor,  notice  of,  177. 
Dissolution  of  corporation,  274. 

by  forfeiture  of  charter,  275. 

by  limitation,  274. 

by  repeal  of  charter,  275. 
Dissolution  of  partnership,  256. 

causes  of,  256. 

notice  of,  257. 
Domain,  eminent,  104. 
Dormant  partner,  253. 
Dower  estate,  105. 
Draft,  acceptance  of,  167. 

bank,  164. 

defined,  164. 

personal,  defined,  164. 

sight,  166. 

three-party,  165. 

time,  166. 

two-party,  165. 
Drafts,  kinds  of,  164. 
Drawee  of  draft,  156,  157. 
Drawer  of  draft,  156,  167. 
Duress,  21. 

Earnest  money,  77. 

Easements,  102. 

Ecclesiastical  corporation,  267. 

Elevator  insurance,  205. 

Emblements,  106. 

Eminent  domain,  104. 

Employers'  liability  insurance,  204. 

Endowment  policy,  200. 

Equity  and  law,  286. 

Estate  by  curtesy,  105. 

by  the  entirety,  in. 

dower,  105. 

for  life,  105. 

for  years,  107. 

in  fee  simple,  104. 

in  land,  104. 

in  severally,  no. 

legal,  no. 
Estoppel,  234. 


Exceptional  contracts,  137. 
Executed  contract,  8. 
Execution,  293. 
Executory  contract,  8. 
Existence,  potential,  78. 
Express  contract,  6. 
Express  warranty,  83. 

Failure  of  consideration,  27. 
Federal  courts,  290. 
Fee  simple,  estate  in,  104. 
Fidelity  insurance,  204. 
Fiduciary  relations,  22. 
Fire  insurance,  defined,  189. 

important  clauses,  193. 

proof  of  loss,  195. 
Fixtures,  65. 
Foreign  bills  of  exchange,  defined, 

Foreign  corporation,  275. 

Formal  contract,  7. 
i^Fraud,  21. 
^Fraudulent  acts,  15. 
\Full  covenant  warranty  deed,  112. 

General  agent,  235. 
Good  consideration,  24. 
Grace,  days  of,  176. 
Guaranties,  kinds  of,  220. 
Guarantor,  219. 
Guaranty,  216,  22O. 

and  suretyship,  216. 

consideration  of,  218. 

continuing,  220. 

contract,  216. 

general,  220. 

limited,  221. 

of  collection,  221. 

of  payment,  221. 

special,  220. 
Guest,  138. 

Holder  for  value,  157. 
Homestead  act,  106. 

Immoral  acts,  14. 
Implied  contract,  6. 
Implied  warranty,  83. 
^Indemnity  contracts,  189. 


298 


INDEX 


Indorsee,  170. 

Indorsements,  kinds  of,  171. 
Indorser,  defined,  170. 
Indorser's  contract,  170. 

kinds  of,  170. 

liability,  173. 

notice  to,  173. 
Infants,  contracts  of,  9. 
Influence,  undue,  22. 
Injunction,  294. 
Inland  bill  of  exchange,  164. 
Innkeeper,  defined,  137. 

liability  of,  138. 

Innkeepers,  cases  on  laws  of,  139. 
Innkeeper's  lien,  139. 
Insane  persons,  contracts  of,  10. 
Insurable  interest,  191,  197. 
Insurance,  accident,  204. 

alienation  clause,  194. 

application  for,  192,  198. 

cancellation  clause,  195. 

cases  on,  206. 

casualty,  203. 

credit,  205. 

elevator,  205. 

employer's  liability,  204. 

fidelity,  204. 

fire,  189. 

life,  196. 

lightning  clause,  193. 

marine,  205. 

policy,  fire,  190. 

proof  of  loss,  195. 

•pro  rata  clause,  194. 

rebuilding  clause,  195. 

renewal,  195. 

standard  fire,  190. 

title,  205. 

vacancy  clause,  194. 
Insured,  190. 
Insurer,  190. 
Interest,  legal  rate,  178. 

maximum  rate,  178. 
International  law,  i. 
Interstate  Commerce  Law,  143. 
Irregular  indorser,  170. 

Joint  and  several  note,  163. 
Joint  note,  163. 


Joint  tenancy,  no. 
Jurisdiction,  defined,  287. 

Land,  estates  in,  104. 

Landlord,  107. 

Law,  and  equity,  286. 

civil,  4. 

commercial,  4. 

common,  2. 

constitutional,  2. 

criminal,  4. 

defined,  i. 

International,  i. 

Interstate  Commerce,  143. 

merchant,  154. 

moral,  i. 

municipal,  2. 

natural,  i. 

statute,  3. 

suit,  289. 

Lay  corporation,  267. 
Lease,  107. 

assignment  of,  109. 

subletting  under,  no. 
Legal  rate  of  interest,  178. 

tender,  31. 
Letter  of  credit,  169. 
Liability  of  bailee,  129. 

of  common  carrier,  144. 

of  indorsers,  173. 

of  innkeeper,  138. 
Lien,  of  bailee,  128. 

of  common  carrier,  143. 

of  innkeeper,  139. 

seller's,  87. 
Life  insurance,  196. 

application  for,  198. 

beneficiary,  197. 

insurable  interest,  197. 

kinds  of,  199. 

parties  and  the  contract,  197. 

premium,  196. 
Life  tenant,  105. 
Limitations,  Statute  of,  34. 
Limited  guaranty,  221. 

partner,  253. 
Liquidated  damages,  292. 

Maker  of  promissory  note,  163. 


INDEX 


299 


Marine  insurance,  205. 

Married  women,  contracts  of,  II. 

Maturity  date,  how  computed,  177. 

Merchant,  law,  154. 

Mistake  regarding  contract,  19. 

Money,  earnest,  77. 

Moral  law,  I. 

obligation,  27. 
Mortgage,  chattel,  82. 

real  property,  113. 
Municipal  law,  2. 
Mutual  agreement,  15. 
Mutual  assent,  15. 
Mutual  insurance  company,  189. 

National  Bankruptcy  Law,  32. 
Natural  law,  I. 
Navigable  streams,  101. 
Necessaries,  defined,  9. 
Negotiability,  156. 
Negotiable  instruments,  155. 

cases  on,  176. 

contracts  of  parties  to,  162. 

defenses,  157. 

delivery  of,  161. 

form  of,  159. 

kinds  of,  15. 

presentment  of,  174. 

statute,  155. 

Negotiation,  definition  of,  169. 
Nominal  partner,  253. 
Non-navigable  streams,  100. 
Note,  promissory,  defined,  156. 

joint,  163. 

joint  and  several,  163. 

parties  to  a,  163. 

several,  162. 
Notice  of  default,  221. 

of  dishonor,  177. 

of  dissolution  of  partnership,  257. 

of  protest,  177. 

to  indorsers,  173. 

Offer  and  acceptance,  15. 
Oral  contracts,  7. 
Ostensible  partner,  252. 

Parol  contract,  7. 
Parties,  to  a  contract,  8. 


Parties,  to  a  promissory  note,  163. 
Partner,  dormant,  253. 

limited,  253. 

nominal,  253. 

ostensible  or  public,  252. 

secret,  252. 

silent,  253. 

special,  253. 
Partners,  choice  of  associates,  255. 

compensation  of,  255. 

kinds  of,  252. 

liability  of,  254. 

power  of  majority  of,  255. 
Partnership,  articles  of,  251. 

by  estoppel,  252. 

cases  on,  258. 

defined,  258. 

dissolution  of,  256. 

how  formed,  250. 
Passengers,  carriers  of,  147. 
Passing  of  title,  78. 
Payee  of  promissory  note,  163. 
Payment,  guaranty  of,  221. 
Personal  draft  defined,  164. 

property,  64. 
Plaintiff,  288. 

Pleading  and  practice,  288. 
Pledge,  128. 
Potential  existence,  78. 
Power  of  attorney,  234. 
Preferred  stock,  271. 
Premium,  189. 

Presentment  and  demand,  174. 
Presentment,  waiver  of  notice  of, 

178. 

Presumption  of  consideration,  23. 
Principal,  defined,  233. 

liability  of,  236. 

obligations  of,  237. 
Private  corporation,  267. 
Procedure,  285. 

Proceedings,  supplementary,  291. 
Promissory  note,  defined,  156. 

parties  to  a,  163. 

payee  of,  163. 

Promissory  notes,  kinds  of,  162. 
Property,  absolute,  64. 

in  general,  63. 

personal,  64. 


300 


INDEX 


Property,  real,  64. 

special,  64. 

use  of  bailed,  127. 
Protest,  notice  of,  177. 
Provisional  remedies,  293. 
Proxy,  voting  by,  272. 
Public  corporation,  267. 

partner,  252. 

Buasi  contract,  7. 
uitclaim  deed,  in. 

Ratification  of  an  agency,  234. 
Reality  of  consent,  18. 
Real  property,  64,  100. 

contracts,  100. 

conveyances,  in. 

corporeal  and  incorporeal,  102. 

mortgage,  113. 
Receipt,  warehouse,  157. 
Regular  mdorser,  170. 
Remedies,  by  action  at  law,  292. 

for  breach,  85. 

provisional,  293. 
Replevin,  294. 

Sale  of  personal  property,  70. 
Sales,  warranties  in,  83. 
Secret  partner,  253. 
Seller's  lien,  87. 
Set-off,  291. 

Several  note,  defined,  162. 
Sight  draft,  166. 
Silent  partner,  253. 
Simple  contract,  7. 
Special  agent,  235. 

guaranty,  220. 

partner,  253. 

property,  64. 
Specialty  contract,  7. 
Specific  performance,  292. 
Statute  law,  3. 

NegotiableTnstruments,  155. 
Statute  of  Frauds,  36. 
Statute  of  Limitations,  34. 
Stock,  common,  27. 

cumulative  preferred,  270. 

preferred,  270. 

treasury,  271. 


Stoppage  in  transitu,  87. 
Straight  life  policy,  199. 
Subagents,  238. 

Subject  matter,  of  contracts,  12. 
Subpoena,  defined,  289. 

duces  tecum,  289. 
Subrogation,  218. 
Subterranean  water,  101. 
Summons,  288. 

Supplementary  proceedings,  291. 
Surety,  217. 
Suretyship,  222. 
Surrender  values,  201. 

Tenancy  in  common,  no. 

joint,  no. 
Tenant,  107. 

at  will,  109. 

life,  105. 

Termination  of  agency,  238. 
Termination  of  bailment,  130. 
Three-party  draft,  165. 
Time  draft,  166. 
Title  insurance,  205. 
Title,  passing  of,  78. 
Treasury  stock,  271. 
Two-party  draft,  165. 

Ultra  vires  acts  of  corporations,  273. 
Undue  influence,  22. 
Unidentified  goods,  sale  of,  81. 
Usury,  defined,  178. 

Valuable  consideration,  24. 
Virtual  acceptance,  169. 
Voting  by  proxy,  272. 

Wagers,  contracts  of,  14. 

Waiver   of  notice  of   presentment, 

178. 

Warehouse,  receipt,  157. 
Warranties,  83. 

in  bailment,  129. 

in  sales,  183. 

remedies  for  breach  of,  85. 
Waste,  106. 

Water,  subterranean,  101. 
Will,  tenant  at,  109. 


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